Modular Kitchen - Catching up in Modern Retailing
Gone are the days when women cooked with a simple stove, choolahs, the walls will be dirty, smoky & every weekend comes relief to kitchens. As women begin to move from home to corporate world, the kitchens were the first ones to reflect the change of mindset in the society. It evolved and with the advent of LPG women were slowly getting used to non-smoky and non-greasy kitchens.
An Indian woman spends a good part of her time in the kitchen, Nowadays kitchens have become the fashion statement, exhibiting the mistress style, her lifestyle and her status in the society.
In the present era as the retail sector tends towards better organization, the haunting question that comes to the mind of most retailers and marketing managers on kitchenware retailing.
Paradigm Shift: The innovation of kitchen utensils and cooking appliances, their introduction into the market and their appropriate pricing, promotion and distribution in order to make it easily available to target customers can be summed up as kitchenware retailing.
Kitchens are the cores of activity for any household. Nowadays a major portion of the urban population leads a highly migratory lifestyle. They change their locations during their education and career and this trend continues well into the initial marital period. This call for the need for kitchenwares which are reconfigurable (i.e. modular) and can move and move along with them. Thus a “Paradigm Shift” can be observed in the pattern of kitchens and kitchenware.
MODULAR KITCHEN???
With the passage of time kitchens have prioritized to become the most expressing place in our houses. It has been very rightly perceived that one who has an organized kitchen leads an organized lifestyle. Modular kitchens are the latest forms of organized kitchens that have brought in a revolution in the industry of kitchenware retailing.
As the name suggests, modular kitchens are so called because they comprise of reconfigurable kitchen cabinets that are designed to properly suit the dimensions of any kitchen. In addition to these, important kitchen accessories such as sinks, chimneys, ventilators etc, come as inbuilt facilities along with the cabinet structures.
Modular kitchens have some striking edges which clearly make them the hot choice for majority households. Since the constituent parts are reconfigurable, therefore problems faced with shifting of residence become less. Kitchen parts are dismantled, packed in boxes, shifted, and reorganized in the new house. Secondly kitchen designs have a wide variety and customers get the best design according to their choice. In addition to this maintaining, cleaning and repairing of defected kitchen parts become very easy owing to fact of modular design.
Thus defining modular kitchen with a new dimension as:
During its inception in India most of the early players imported modular kitchen parts. Keeping this fact in mind it can be stated that many of the earlier players pulled out primarily due to three reasons, firstly they took too long to import, secondly they failed to fit the requirements of space, and thirdly 10-15 years ago this concept was very much ahead of time. Today, with fewer players, the market has matured, and architects and interior designers are increasingly making space for them in their projects. To gain a competitive advantage most of the interior designers are coming up with innovative designs in a way to give a perfect blend of style and functional efficiency by optimum utilization of space, thereby making “cooking” a wonderful experience.
Advantages Modular Kitchens : “Less smoky” and “less oily” are the calls for modern day housewives. Modular kitchens are the latest thing in kitchen iterior designing with high style and gloss finish. It further makes cooking fast and effective. These are customed made,and assembled at the customer’s home. Empty places can be used more efficiently with modern day modular kitchens. Designs of racks and cabinets can be changed as per convinience since these parts can be easily dismantled.
Major Players: The principal market for modular kitchens lies in the unorganized sector, and the organized market is worth only Rs 500 crore Rs 5 billion (but growing at a 50% rate).The Indian kitchen, has gradually witnessed a total 180-degree shift in every aspect, be it the basic look of the kitchen to the cooking habits and the kind of utensils used! With the markets more mature and changing lifestyles modular kitchens.TTK Prestige, added "Modular Kitchens" to its portfolio in 2004. Some of the other major players like Timbor Home Pvt Ltd, the Ahmadabad-based manufacturer and marketer of modular kitchens are launching wood-less, eco-friendly doors in the country in markets such as Gujarat, Maharashtra and Karnataka. The Indian market has recently witnessed innovative products lines introduced by players such as Faber, Godrej, Kaff, Hacker, Carysil,@home from Nilkamal etc.
Opportunities:
Modular kitchen retailing is being driven by changing lifestyles and by strong disposable income growth, which in turn is supported by favorable demographic patterns. Nuclearisation of families is also leading to more housing especially in the urban landscape which has a direct positive bearing on the business. The number of working women is also on a rise. This along with increased international lifestyle exposure and strong media influence is increasing the demand for home improvement retailing.
Behavioral Changes: Kitchens in India changes with change in food and culture. Each Indian kitchen is designed to facilitate the preparation of local food preparations. The style of cooking depends on regional food type, community taste preferences, weather, geography etc.
Moreover Indian foods require a lot of pre processing since Indians believe that spicier food builds up better taste. With modern pre-processing appliances the task of preparing has become easier for most of the urban ladies. Modern Indian population desires for consumption fueled lifestyle and hence Indian kitchens are reshaping today.
In the past the dinning area was included within the kitchen. The typical joint family structure showed women preparing different items in large quantity for the whole family. They were techno-savvy and rely on electronic cooking appliances. In today’s scenario urbanization and migration for better opportunities have given rise to nuclear families. They now dine in a separate dinning space.
Increase in the Number of Working Women: The fact that more and more women are taking to jobs has redefined the rules of social behavior. Family incomes have increased, as has the exposure. Women with disposable incomes will also feel the strong desire to look good in their kitchens.
Easy Bank Credit boosts retail: Easy availability of finance has increased giving an unprecedented boom on buying a house and renovation consumer durables has transformed into consumer revenue expenditure because of the easy availability of finance.
Social Indicator: The present India boasts of a 550million population that is below the age of 25 years. Furthermore, the market size at Purchasing Power Parity (PPP) is estimated to be above US$1.5 trillion. It produces a large pool of educated professionals such as scientific and technical manpower, graduate engineers, managers, and computer professionals. This has thus provided large number customers for modern kitchenware & modular kitchens with a sound technological knowledge.
Buying Power & Consumption: It is estimated that the consuming class and the climbers are expected to grow from a level of 120.8 million households (in 2001- 02) to a level of 157.2 million households (in 2006-07) thus registering a growth of 5.5% p.a.The Marketing Whitebook has estimated that out of the total consuming class and the consumer class, almost 56% (~ 46 million) is expected to be concentrated in urban India. The proportion of the consuming class and the climbers in the urban markets are likely to drive the demand significantly especially for lifestyle products.
Kitchen Ergonomics
What is ergonomics? The word ergonomics is a Greek word where means ‘ergo’ = work and ‘nomos’ = law. Ergonomics deals with the design of system that would help people to help in making their work effective. Really, it’s just a long word to describe a simple concept - don’t make things more difficult than they need to be. Ergonomic planning in the kitchen is based around three main activity points: They are Man, Kitchen appliances and Environment. In kitchens the introduction of modern cooking appliances makes work faster and more efficient. The planning for efficiency and ease of use remains more important than ever. Even in the kitchen, ergonomics is now a new ingredient in the overall design. Convenient positioning of the main kitchen activities includes proper depth of the kitchen sink and correct height countertops.
Don’t fit in the kitchen. Let the kitchen fit around you!
Fast and efficient work is the prime call for all urban households in India. Hence an innovative technology is the prime requirement that can help women in the cities to cook and at the same time have the ability to look at other aspects of the family. The introduction of kitchen appliances such as microwave, electronic ovens, refrigerators, electric chimneys and other electrical appliances used for cooking along with other aspects such as organized kitchen cabinets serves the purpose of working in the kitchen and simultaneously interacting with the environment to accomplish other tasks in the outside world.
FORCES INFLUENCING MODULAR KITCHENS
In modern days a lot of steel and glassware has been replaced by plastic ware. Nowadays plastic utensils play an important role in the designing of modular kitchens. Plastic ware is unbreakable, easy to wash, light in weight, more durable, visually more decorative, and cheaper in cost. Some major players of course believe that an effective supply chain is very much necessary for incorporating them into modular kitchens. Plastic ware retailing however has a bulk market share in the unorganized sector.
Challenges:
Lack of retail space: The biggest challenge facing the Indian organized retail sector is the lack of retail space. With real estate prices escalating due to increase in demand from the Indian organized retail sector, it is posing a challenge to its growth. With Indian retailers having to shell out more for retail space it is affecting their overall profitability in retail. Where to physically locate a retail store may help or hinder store traffic. Well placed stores with high visibility and easy access, while possibly commanding higher land usage fees, may hold significantly more value than lower cost sites that yield less traffic. Understanding the trade-off between costs and benefits of locations is an important retail decision.
Poor Infrastructure: The traditional realty players don’t have retail property development experience as reflected in their exterior focused design and improper tenant mix. The shortage is mostly visible in the larger metros due to the mall revolution & lack of town planning. Owing to space scarcity in major metros many retailers are entering tier 2 & tier 3 cities. Unless real estate costs lower, retailers would take a long time to break-even.
Product mix: With an increase in the marketshare, homebuyers have simultaneosly become more sophisticated. Hence designer and architects have to constantly revise their plans to fulfill customer demands.
Pricing: The determinants of retailer pricing strategy and tactics are likely to be influenced by manufacturer/brand, category and customer factors, as well as by market, chain ,and store factors. Different markets or cities may witness different pricing practices for the modular kitchens. In particular, market type, in terms of whether the market is a metropolitan city or a small city, may be associated with a particular pricing environment and thus may be related to pricing practice.
Engineering: The designs for modular kitchens are made on CAD sofwares which further creates a problem for the manufacturer or carpenter to implement and meet the specifications accordingly.
Promotions: The communication channels are very limited in this segment. Hence consumers hardly have any awareness about brands. This is a major challenge for competitiors in the market. Television advertising is almost nil in this segment, rather they are more focusing on home decor magazines for their promotions.
Future of Kitchens:
India is moving on a path of globalization. With progress in time Indians are looking towards means of livelihood that are efficient, economic and fast. Based on these factors any forecast would suggest that the demand for modular kitchens will constantly be on the rise in the coming years.
Retailers believe that with greater availability of designs and increased number of companies’ people will get products in this segment at affordable prices. Products will have good resale value and retailers will be able to throw up better offers for promotional purposes. Modern marketing managers claim that the India is thus walking the “MODULAR PATH”
With the advent of newer technologies in the Indian market people are looking towards facilities that would be more time saving and easier to operate. Hence a claim can be made that in the coming years more and more advanced technology would be witnessed in the field of kitchen appliances. A new form of “INTERACTIVE KITCHENS” will be used wherein a man-machine interface shall be incorporated in the future Indian kitchens. One might expect another paradigm shift from “modular” to “interactive-modular” kitchens. Future designs will have reconfigurable kitchen modules with fully integrated and networked facilities that will take care of a number of practical and emotional daily requirements. Such new designs will focus on aspects such refrigeration, storage, cooking and cleaning works synergistically in a new light. Engineers have already incorporated efficient facilities such as water saving improved washing and waste management techniques in western kitchens that makes them more eco friendly. Companies in India are now looking forward to get these facilities in the Indian market at affordable prices.
GREEN KITCHENS
However nowadays consumers have imbibed an eco friendly sense among themselves which we term as the “GREEN ATTITUDE”. Other energy efficient kitchen appliances if used properly can minimize environmental losses to a great extent. For instance an efficient dishwasher can use a lot less water than washing dishes with hand. But a dishwasher is not very common in the Indian households. Hence in order to achieve eco friendly kitchens, Indian customers should be made aware of the utility of such appliances. The usage of wood is an environmental hazard. Builders and developers, who are aware of this fact, are looking forward to the usage of alternative eco friendly materials for the construction of kitchen cabinets.
While going green in the kitchen will save you money on energy costs. Earth-friendly products are available in a wider range of styles and costs than ever before, letting you go any shade of green you desire. Moving in this direction one can conclude that in India, the way a marked shift has been observed in designing of kitchens(i.e, from unorganized kitchens to modular kitchens), similarly there can be a future shift observed wherein consumers will go for eco friendly “GREEN” modular kitchens.
Conclusion:
As discussed above, consumer demand in this segment has been more positive towards light and elegant. Today's employed youth are much more mobile than the elderly bread earners and therefore will always have a higher preference for the modular imported units. The demand for Modular Kitchen and kitchen appliances is also on the rise. Overall, consumer now would prefer to shop for these items at a place where they are confident consistency in quality of the product, be it in the premium range or the value range. There is good potential here for the Organised players.
Wednesday, January 28, 2009
fashion retailing
Fashion Apparel Retailing
Fashion refers to the things popularly accepted in a culture and society. It includes certain ways of behaviour or the use of certain types of products by a large number of consumers for a specific period of time, because they are considered to be socially acceptable and appropriate then. It is the culmination of style, glamour and beauty.
We differentiate between a style, fad and a fashion as follows. A style is basically a distinct mode of expression appearing in human behaviour. It can leave an impact over generations and keep going in and out of trend. A fashion is a style that is currently accepted or popular. A fashion that meets a genuine need and that is also in accordance with widely accepted social norms tends to last longer. Fads are fashions that come into existence quickly, get adopted with great enthusiasm, peak early but also decline very fast. One of the reasons for their quick decline is that they do not satisfy a genuine need and are mainly an impulsive behaviour pattern.
Evolution of the Indian Fashion industry:
The Indian fashion industry has seen an upswing from the street markets to dzepartmental stores, supermarkets, hypermarkets and lifestyle stores. But lately the trend is moving towards the upscale luxury and international brands owing to the rising disposable income, which has roughly doubled since 1985 (as per McKinsey Report 2007). The Indian market thus presents a huge opportunity in this arena.
Characterizing an object as fashion:
An important guideline used to classify objects as fashion would be that aesthetic and emotional appeals like visual images, scents, tactile feelings etc. influence the communication, purchase and use decisions. Also, the object needs to be accepted by a sizeable segment of consumers.
Figure 1: Characterizing an object as fashion
Challenges in Retailing of Fashion in India:
Short and Broken Lifecycles: The main challenges in retailing fashion arise on account of the short and broken life cycles of fashion goods. Fashion is an extremely ephemeral and transient industry. Things that are in fashion one season may be passé the next. It may be possible that before a fashion hits the market it has already become obsolete. Hence the entire industry has to strive towards achieving shorter lead times and lower inventory levels.
Seasonal Nature: Fashion is also seasonal in nature. Everything from colours and fabrics to cuts and styles vary across seasons. Hence designers have to come up with fresh collections every season. In order to handle seasonality, accurate forecasting of the market trends is required. Moreover timeliness is the key to successful seasonal merchandising, which means having an understanding what fashions and trends will work when.
Non-Universal Nature: Another major challenge is the non universal nature of fashion goods. What appeals aesthetically to customers varies widely across nations and at times even regionally. A trend might be very popular in one country, but it might not have the potential to dominate the national market. This especially gains importance in a diverse market such as India which incorporates a consumer base of 62 socio cultural regions, 23 languages and diverse habits and climatic conditions and different cultural orientations.
Matching Global Standards: The Indian fashion industry needs to go a far way in order to catch up with global standards of technology and productivity. This would give Indian fashion houses a global standing and avenues for international expansion.
Opportunities Retailing of Fashion in India:
Promising Future: The Indian fashion industry holds great promise for the future. Although the organised apparel and accessories retail market accounted for 13.6 per cent of the total clothing, textiles and fashion accessories market in 2004 that rose to 18.9 per cent in 2006 (As per the India Retail Report 2007), unorganized formats still dominate the Indian apparel market.
Economic Growth: India’s accelerated economic growth has increased the spending power and consumption levels of customers. India has a billion plus consumers with rising incomes and increasing purchasing power. Consumer confidence is on a high due to positive expectation about the economy. India as a developing nation has just begun its consumption journey and this applies to the fashion industry as well.
Changing Demographics: India has a population of over a billion, with annual growth rate of 1.6%. India is also expected to account for 18% of world population by 2030. India houses a sizeable section of the urban middle class who are potential customers for fashion goods. Changes in lifestyle and exposure to global cultures have opened up new avenues for retailing of fashion goods.
Types of Fashion Apparel:
Fashion apparel can be classified as couture fashion, ready to wear apparel, designer fashions, mass fashions and classics. Couture fashions are the customized designs made for a specific customer by famous designers or design houses. These usually cater to the very high strata of society.
Ready to wear apparel are manufactured in factories made in standardized sizes. Designer fashions are branded merchandize that are based on couture fashion, but are adapted in order to appeal to a wider audience. Designer and ready to wear fashions mainly target the upper-middle section of society.
Mass fashions are produced in large quantities and sold at reasonable price ranges. It usually appeals to the lower and lower-middle social classes. Classics include the fashions that have been widely accepted over a long period of time.
Factors Affecting Fashion:
An important characteristic of fashion is that it has a very non-universal nature. It adoption depends on various environmental factors such as demographic, economic, sociological, psychological, natural, etc. Few examples are given below:
Demographic
Age, Education levels
Economic
Level of economic development, disposable income
Sociological
Culture, Attitudes, Values, Feelings about class structures, Gender roles, Family structure
Psychological
Boredom, monotony, seeking a change in lifestyle, recognition, acceptance, expression of individuality
Natural Environment
Geography, Topology, Climate
Table 1: Factors Affecting Fashion
Development & Spreading of Fashion:
Fashions usually undergo a series of stages which can be depicted as follows:
Figure 2: Development & Spread of Fashion
The first stage in the lifecycle of a fashion would begin with the creation of a new design or style either by the designers or even by creative customers, retailers etc. However, the true life of a fashion begins when it gets recognized and accepted. The initial adopters of a fashion are called the fashion leaders or innovators.
The characteristic traits of these fashion leaders can be illustrated as follows:
Figure 3: Traits of Fashion Leaders
The third stage occurs when the fashion spreads from the leaders to others and gets widely accepted. These customers are called the early adopters. The fashion now becomes more visible, receives greater publicity, and media attention, and is readily available in retail stores. When large scale spread of the fashion has taken place, the fourth stage of saturation occurs. Now the very same fashion starts to seem mundane and boring to people. This is when the final stage of obsolescence and rejection occurs. The fashion then no longer serves its purpose of expressing one’s individuality.
Core Participants in the Fashion Industry:
Raw Material Suppliers provide the fibre which is the primary input for fashion apparel. These fibres can be natural (e.g. cotton, wool) or they can be synthetic (e.g. nylon, lycra, etc.).
The fabric manufacturers obtain the fibre from the suppliers and spin them into the cloth using techniques such as weaving, knitting, etc. The fibre suppliers work towards promoting their fibres to these fabric manufacturers so that they will come up with new fabrics using their fibres. It is important for the fabric manufacturers to be able to predict industry trends in advance so that they can supply the necessary fabric in a timely manner for the fashions to be available when required.
At the next level in the chain are the apparel manufacturers who can range from small companies to large scale mass manufacturers. These apparel manufacturers need to work on conjunction with the fibre and fabric manufacturers so that they are able to design quick response systems and thus be able to reduce the lead times and inventory levels.
Then there are the fashion designers who are the pivot for the creativity in creating the fashions. These designers need to be able to tap the pulse of the market so that they are able to design and offer the most acceptable fashions.
Fashion market centres are the avenue through which apparel manufacturers can sell their merchandize to retailers. Certain markets in the world are deemed to be the trend setting markets for any industry. These are called the lead markets. As far as fashion goods are concerned, Italy is most often considered as the lead market.
The fashion retailers facilitate as the link between the industry and the customers. They can not only spike the interest of the customers in new fashions but also obtain valuable feedback of the customers which could be used to get an idea about which fashions are selling and which are not.
The fashion press serves the purpose of communicating to everyone involved in the fashion industry. An example would be The Bombay Times section of The Times of India. The press conveys valuable information that helps the other participants of the fashion industry, right from the raw material suppliers to the customers, in their decision making.
Marketing Communication in the Fashion Industry:
Quick and prompt communication has a special importance in the field of fashion owing to the ever decreasing life cycles of fashion goods. Generating interest and awareness is what prompts customers to evaluate and try out the new fashions, which finally leads to adoption.
This communication can be achieved through fashion magazines which report on and interpret fashion news for consumers. Leading examples of fashion magazines include Vogue, Elle, Vanity Fair, etc. Even newspapers (Example: Bombay Times) now cover the fashion industry as part of their national news coverage. Countless television shows and feature films also provide an insight into the fashion world.
Moreover, events like fashion shows, fashion weeks, etc. offer a platform for the various participants of the industry to come together and showcase new trends and designs. Examples of fashion events include Lakme fashion Week, Wills Lifestyle India Fashion Week, HDIL India Couture Week, etc.
Conclusion:
India is a nation with a rich and varied textile heritage, where each region has its own unique take on what appeals aesthetically to customers. While traditional wear will most probably never go out of fashion in India, the young and urban India also exhibits openness to rapidly changing international fashion trends. Fashion in India is now at a vibrant and nascent stage. It is a colourful and glamorous world where new trends are started every day. However, there is still ample room for growth and improvement for organized retailing in the Indian fashion industry with formats like hypermarkets and Malls slated to be the main drivers of the growth.
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Fashion refers to the things popularly accepted in a culture and society. It includes certain ways of behaviour or the use of certain types of products by a large number of consumers for a specific period of time, because they are considered to be socially acceptable and appropriate then. It is the culmination of style, glamour and beauty.
We differentiate between a style, fad and a fashion as follows. A style is basically a distinct mode of expression appearing in human behaviour. It can leave an impact over generations and keep going in and out of trend. A fashion is a style that is currently accepted or popular. A fashion that meets a genuine need and that is also in accordance with widely accepted social norms tends to last longer. Fads are fashions that come into existence quickly, get adopted with great enthusiasm, peak early but also decline very fast. One of the reasons for their quick decline is that they do not satisfy a genuine need and are mainly an impulsive behaviour pattern.
Evolution of the Indian Fashion industry:
The Indian fashion industry has seen an upswing from the street markets to dzepartmental stores, supermarkets, hypermarkets and lifestyle stores. But lately the trend is moving towards the upscale luxury and international brands owing to the rising disposable income, which has roughly doubled since 1985 (as per McKinsey Report 2007). The Indian market thus presents a huge opportunity in this arena.
Characterizing an object as fashion:
An important guideline used to classify objects as fashion would be that aesthetic and emotional appeals like visual images, scents, tactile feelings etc. influence the communication, purchase and use decisions. Also, the object needs to be accepted by a sizeable segment of consumers.
Figure 1: Characterizing an object as fashion
Challenges in Retailing of Fashion in India:
Short and Broken Lifecycles: The main challenges in retailing fashion arise on account of the short and broken life cycles of fashion goods. Fashion is an extremely ephemeral and transient industry. Things that are in fashion one season may be passé the next. It may be possible that before a fashion hits the market it has already become obsolete. Hence the entire industry has to strive towards achieving shorter lead times and lower inventory levels.
Seasonal Nature: Fashion is also seasonal in nature. Everything from colours and fabrics to cuts and styles vary across seasons. Hence designers have to come up with fresh collections every season. In order to handle seasonality, accurate forecasting of the market trends is required. Moreover timeliness is the key to successful seasonal merchandising, which means having an understanding what fashions and trends will work when.
Non-Universal Nature: Another major challenge is the non universal nature of fashion goods. What appeals aesthetically to customers varies widely across nations and at times even regionally. A trend might be very popular in one country, but it might not have the potential to dominate the national market. This especially gains importance in a diverse market such as India which incorporates a consumer base of 62 socio cultural regions, 23 languages and diverse habits and climatic conditions and different cultural orientations.
Matching Global Standards: The Indian fashion industry needs to go a far way in order to catch up with global standards of technology and productivity. This would give Indian fashion houses a global standing and avenues for international expansion.
Opportunities Retailing of Fashion in India:
Promising Future: The Indian fashion industry holds great promise for the future. Although the organised apparel and accessories retail market accounted for 13.6 per cent of the total clothing, textiles and fashion accessories market in 2004 that rose to 18.9 per cent in 2006 (As per the India Retail Report 2007), unorganized formats still dominate the Indian apparel market.
Economic Growth: India’s accelerated economic growth has increased the spending power and consumption levels of customers. India has a billion plus consumers with rising incomes and increasing purchasing power. Consumer confidence is on a high due to positive expectation about the economy. India as a developing nation has just begun its consumption journey and this applies to the fashion industry as well.
Changing Demographics: India has a population of over a billion, with annual growth rate of 1.6%. India is also expected to account for 18% of world population by 2030. India houses a sizeable section of the urban middle class who are potential customers for fashion goods. Changes in lifestyle and exposure to global cultures have opened up new avenues for retailing of fashion goods.
Types of Fashion Apparel:
Fashion apparel can be classified as couture fashion, ready to wear apparel, designer fashions, mass fashions and classics. Couture fashions are the customized designs made for a specific customer by famous designers or design houses. These usually cater to the very high strata of society.
Ready to wear apparel are manufactured in factories made in standardized sizes. Designer fashions are branded merchandize that are based on couture fashion, but are adapted in order to appeal to a wider audience. Designer and ready to wear fashions mainly target the upper-middle section of society.
Mass fashions are produced in large quantities and sold at reasonable price ranges. It usually appeals to the lower and lower-middle social classes. Classics include the fashions that have been widely accepted over a long period of time.
Factors Affecting Fashion:
An important characteristic of fashion is that it has a very non-universal nature. It adoption depends on various environmental factors such as demographic, economic, sociological, psychological, natural, etc. Few examples are given below:
Demographic
Age, Education levels
Economic
Level of economic development, disposable income
Sociological
Culture, Attitudes, Values, Feelings about class structures, Gender roles, Family structure
Psychological
Boredom, monotony, seeking a change in lifestyle, recognition, acceptance, expression of individuality
Natural Environment
Geography, Topology, Climate
Table 1: Factors Affecting Fashion
Development & Spreading of Fashion:
Fashions usually undergo a series of stages which can be depicted as follows:
Figure 2: Development & Spread of Fashion
The first stage in the lifecycle of a fashion would begin with the creation of a new design or style either by the designers or even by creative customers, retailers etc. However, the true life of a fashion begins when it gets recognized and accepted. The initial adopters of a fashion are called the fashion leaders or innovators.
The characteristic traits of these fashion leaders can be illustrated as follows:
Figure 3: Traits of Fashion Leaders
The third stage occurs when the fashion spreads from the leaders to others and gets widely accepted. These customers are called the early adopters. The fashion now becomes more visible, receives greater publicity, and media attention, and is readily available in retail stores. When large scale spread of the fashion has taken place, the fourth stage of saturation occurs. Now the very same fashion starts to seem mundane and boring to people. This is when the final stage of obsolescence and rejection occurs. The fashion then no longer serves its purpose of expressing one’s individuality.
Core Participants in the Fashion Industry:
Raw Material Suppliers provide the fibre which is the primary input for fashion apparel. These fibres can be natural (e.g. cotton, wool) or they can be synthetic (e.g. nylon, lycra, etc.).
The fabric manufacturers obtain the fibre from the suppliers and spin them into the cloth using techniques such as weaving, knitting, etc. The fibre suppliers work towards promoting their fibres to these fabric manufacturers so that they will come up with new fabrics using their fibres. It is important for the fabric manufacturers to be able to predict industry trends in advance so that they can supply the necessary fabric in a timely manner for the fashions to be available when required.
At the next level in the chain are the apparel manufacturers who can range from small companies to large scale mass manufacturers. These apparel manufacturers need to work on conjunction with the fibre and fabric manufacturers so that they are able to design quick response systems and thus be able to reduce the lead times and inventory levels.
Then there are the fashion designers who are the pivot for the creativity in creating the fashions. These designers need to be able to tap the pulse of the market so that they are able to design and offer the most acceptable fashions.
Fashion market centres are the avenue through which apparel manufacturers can sell their merchandize to retailers. Certain markets in the world are deemed to be the trend setting markets for any industry. These are called the lead markets. As far as fashion goods are concerned, Italy is most often considered as the lead market.
The fashion retailers facilitate as the link between the industry and the customers. They can not only spike the interest of the customers in new fashions but also obtain valuable feedback of the customers which could be used to get an idea about which fashions are selling and which are not.
The fashion press serves the purpose of communicating to everyone involved in the fashion industry. An example would be The Bombay Times section of The Times of India. The press conveys valuable information that helps the other participants of the fashion industry, right from the raw material suppliers to the customers, in their decision making.
Marketing Communication in the Fashion Industry:
Quick and prompt communication has a special importance in the field of fashion owing to the ever decreasing life cycles of fashion goods. Generating interest and awareness is what prompts customers to evaluate and try out the new fashions, which finally leads to adoption.
This communication can be achieved through fashion magazines which report on and interpret fashion news for consumers. Leading examples of fashion magazines include Vogue, Elle, Vanity Fair, etc. Even newspapers (Example: Bombay Times) now cover the fashion industry as part of their national news coverage. Countless television shows and feature films also provide an insight into the fashion world.
Moreover, events like fashion shows, fashion weeks, etc. offer a platform for the various participants of the industry to come together and showcase new trends and designs. Examples of fashion events include Lakme fashion Week, Wills Lifestyle India Fashion Week, HDIL India Couture Week, etc.
Conclusion:
India is a nation with a rich and varied textile heritage, where each region has its own unique take on what appeals aesthetically to customers. While traditional wear will most probably never go out of fashion in India, the young and urban India also exhibits openness to rapidly changing international fashion trends. Fashion in India is now at a vibrant and nascent stage. It is a colourful and glamorous world where new trends are started every day. However, there is still ample room for growth and improvement for organized retailing in the Indian fashion industry with formats like hypermarkets and Malls slated to be the main drivers of the growth.
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E-volution to Revolution
Retailing to etailing.
ABSTRACT
Marketers must embrace themselves for an e-services revolution, which information technology, changing lifestyles, and demographic shifts are fueling. The current Web-based models for e-services are part of an embryonic phase preceeding an era of rapid transformation, challenge, and opportunity. To prepare for this exciting future, it is necessary to understand the varying technology landscape and the psycho-social dynamics behind consumer adoption. Making bold decisions in how to deliver e-services and learning to partner with customers is essential.
Keywords: Retailing, Etailing, Issues, Challenges and Opportunities,B2C transactions.
Introduction: Electronic retailing, also known as e-Tailing, deals with selling products and services online via the World Wide Web. The term has been used in Internet discussions as early as 1995, it seems an almost inevitable addition to e-mail, e-business, and e-commerce. E-tailing is synonymous with business-to-consumer (B2C) transaction.
E-tailing began to work for some major corporations and smaller entrepreneurs as early as 1997 when Dell Computer reported multimillion dollar orders taken at its Web site. The success of Amazon.com hastened the arrival of Barnes and Noble's e-tail site. Concerns about secure order-taking receded. 1997 was also the year in which Auto-by-Tel reported that they had sold their millionth car over the Web, and Commerce Net/Nielsen Media reported that 10 million people had made purchases on the Web. E-tailing has resulted in the development of e-tailware -- software tools for creating online catalogs and managing the business connected with doing e-tailing. A new trend is the price comparison site that can quickly compare prices from a number of different e-tailers and link you to them.
India’s online population currently stands at 25 million and is predicted to grow four fold to a 100 million by 2007. eTailing stands at Rs. 850 crores in the year 2006-07 and contributes maximum to the Online Non-Travel Industry. It is expected to be Rs 1105 crores industry at the end of 2007-08. Owing to elimination of physical costs, the category offers the best deals for low-end as well as high end products. However, many customers complain about the untimely delivery of products ordered online.
Changing lifestyles and shopping habits coupled with superior options and selections make this interactive medium most attractive to this e-generation .The opportunities of the medium to business include advertising space to strengthen brand equity coupled with lower infrastructure costs, unlimited shelf space, a global audience that can be catered to without the restrictions of time zones and working hours.
Methodology: The qualitative filed research sought to explore the nature of obstacles within the retail industry and the implications of those changes. This is a preliminary study that seeks to highlight the nature of change, rather than to empirically test that change. The discussion based around a serious of 5 interviews with senior managers, etailing consultants and 50 shoppers in Mumbai from the different area of specializations and focusing on the emerging role of the retailing sectors. Such an approach seeks to develop a broad snapshot of the changes occurring with in the industry rather than to build details case studies of individual retailers. Through those interviews it was possible to observe a dramatic transformation in the nature of etailing sectors.
Reasons for e-tailing becoming a hot opportunity can be attributed to many factors viz.
Demographics – In India’s Demographics are likely to continue to favor the Indian retail sector even over the next 10-15 years. India currently has one of the youngest populations in the world. Nearly 60% of Indians are below the age of 30 years and 40% are below 25 years. It is generally thought to be easier to alter the habits of young consumers, including in the area of shopping. Even in 2010, the estimate is for close to 40% of Indians to be below 25 years of age.
India is expected to be one of the few countries to witness a sharp increase in its work force from 2010 as the proportion of dependent population in the total population drops significantly during the next five to ten years. If gainfully employed, this increased proportion of the working-age population is likely to have significantly less free time and will probably be prepared to pay for the convenience that modern format retailing aims to deliver.
Source Internet and Mobile Association of India
No real estate costs: E-tailers do not have to maintain expensive showrooms or warehouses in prime locations. They operate through their web sites and thus save drastically on the real estate costs. The real estate costs in the metropolitan cities are sky high. Besides this, maintenance costs of a virtual store vis-à-vis a physical store is much less. These cost benefits are then passed on to the customers by offering them discounts (which actually go up to 30%). This enables the customers to get commodities at cheaper rates, which is a big attraction for them.
No Inventory hassles: The most, troublesome but critical, job of a traditional retailer is to maintain adequate inventory i.e., there should be no under stocking or overstocking for which lead times play a vital role. On the other hand web dealer has longer lead times and hence fewer inventory hassles.
Mass Media: A supermarket has limited area of operation. It caters to customers of a city (and/or its suburbs), but a web site can be accessed from any part of the country or for that matter from any part of the world, thus increasing the potential customer base.
Better interaction with the customers: One of the greatest benefits of online commerce is its ability to establish interaction en-masse. Interaction refers to the ability of reaching customers on an individual basis and react appropriately to responses of individual customers. Interaction is a vital tool for mass customization. Examples are many and include online marketing of flowers, software books and education. This has also led to greater satisfaction among the online buyers. According to a research agency, 82% of the online buyers have been found to be satisfied with their purchases.
Increase credit card usage and credit availability The increase in credit card usage has been one of the drivers of consumption in the modern retail format and is likely to continue to be so. Credit disbursements on cards and spending per card have been increasing steadily, which augurs well for consumption at modern retail stores. We estimate around 50-60% of consumers use cards for making purchases at stores. Penetration of credit cards is still low at around 13-15 cards per 1,000 people and has the potential to grow, which would further spur consumption at modern retail stores. Despite the rapid growth in credit card sales in India, penetration remains low.
Gaps in online retailing
While it is clear that consumers are adopting the Internet as a shopping medium, gaps remain between the shopping experience in the physical world and the shopping experience online. Unlike the United States which has a long cultural history of catalog shopping, but many Indian shoppers want to touch, feel and examine the product before they buy it. Cultural issues aside, consumer protection laws in India are nowhere as good as those in other countries, and online shoppers are justifiably wary about the product claims made by anonymous Internet vendors.
Weak financial structure: Three elements determine the profitability of an e-tailing operation: Average transaction size, Gross margins and Marketing costs.On each parameter, the odds are stacked against e-tailers in India. According to a study, out of the 4 million Internet users only 6% have ever shopped online. Average transaction size was a paltry Rs 272. Gross margins in 'Internet appropriate' categories of books and music are only 15-30% as compared to 60% in the US.Now, order size multiplied by the margins hardly cover marketing costs let alone any profits.
Every time an e-tailer fulfils an order he incurs a huge variable cost of 30% - 100% to deliver the goods at home. Thus the most optimistic projections suggest that ' on every Rs 100 sales that an e-tailer makes, he loses Rs 50.' E-tailers are beginning to realize that conventional retailing, which aggregated customers under one roof, still makes far better economic sense. After all, it was the customer who incurred the costs of delivering the goods.
In contrast, ensuring delivery to customers at infinite locations changes the cost of doing business completely. The marketing cost (include the cost of delivery and fulfillment) as a percentage of sales is a killing 119 %.
Mounting competitive pressures: The market for online buying is still at a nascent stage. The turnover of the sector is relatively small and many players have already entered into it. Thus many e-tailers are eyeing a small market, exerting more pressure on operating margins.
Shopping is still a touch--feel—see---hear experience: Unlike the Americans, Indians do not suffer from 'time-poverty' and shopping is still considered to be a family outing. Hence this type of an environment creates a problem of customer retention. In e-tailing, customer retention by 5% leads to increase in profits by 25%. Most people buying on the net do it out of curiosity and a repeat purchase is unlikely.
Inadequate information provided when the customers discern: Certain products like clothes, cosmetics etc. involve higher customer involvement. Most customers are comfortable buying books and music on the Internet because the information required making a purchase decision is simple.
But not so when a customer has to buy, say a blue Trouser. Here the customer wants to know: Which shade of blue is it? How does it feel on skin? How easily does it crease? This problem does not crop up in traditional retailing. In cyber space, on the other hand, the buyer is normally starved of crucial information. Only the seller knows about the true quality of trouser. This is a clear case of “information asymmetry".
Technical issues: Some of the other most frequently discussed limitations of the Internet medium for online retailing are security and privacy concerns, speed of access, disconnection during transaction, mass penetration, and lack of navigation standards.
Delivering the goods cost-effectively: At present, every single transaction challenges e-tailers to deliver the goods quickly, cheaply and conveniently. The existing model for home delivery works well for letters and flat packages but not for e-tailing’s high volumes and wide variety of package shapes and sizes. But this is largely a technical and logistical problem, and it will be possible (though perhaps expensive) to solve it by developing new sorting and scanning equipment and by deploying larger delivery vehicles.
Strategies for online retailing
Increasing consumer comfort level: While many consumers are visiting online retailers, few are buying. Online retailers need to improve convenience and value for consumers and assist them in overcoming their fears around security. Retailers must also provide reluctant consumers with compelling reasons for accepting the Internet as a new way to shop. Some of these reasons might include the use of consumer assurance brands and enhanced levels of convenience, customization, selections, service and pricing.
Effective CRM implementation: The e-business CRM connection occurs at the interaction of website and customer experience. These relationship attributes in turn influence the three main customer attitudes: customer satisfaction, trust and perceived quality. The following figure shows how the customer e-business interaction leads to customer relationship attributes, which in turn influences customer attitudes. These attitudes then lead to the CRM goals, which lead back to the customer e-business interaction.
Resolving technology limitations: Many online retailers say their ability to provide enhanced consumer experience is limited by a lack of bandwidth and problems with reliability. Advances in the technological infrastructure will enhance convenience and add a richness of experience to Internet shopping that may now be lacking.
Rapidly scaling internal operations: To respond to the rapid growth of e-commerce, online retailers and their suppliers have to scale up their internal operations. While this requires less investment than in a traditional store environment, significant management resources and investments are still required in fulfilment, customer service, and database technology and management.
Engineering comprehensive convenience: Customers cite many convenience problems with today's online retail environment. Chief among them are the need for consumers to keep re-entering personal data on different sites, the wide variation in customer service and the lack of co-ordination in multichannel retailers.
Developing low-cost distribution: Pricing at online retailers does not yet ret1ect the full potential of electronic commerce. This is partly due to the fact that Web-based fulfilment systems are still evolving. Much of online distribution piggybacks on existing offline systems. Retailers interviewed believe that more effective integration of Web-based technology would significantly reduce costs and online prices
Resolving perceived channel conflicts: Many offline retailers believe they risk cannibalizing sales in existing channels by going online.E-tailing in India can be a success if the e-tailers change their business models and comprehend their customers more. Retailers who achieve scale in their customer bases sooner rather than later will be able to reap the rewards of early investment. These rewards include the ability to develop supplemental revenue streams more easily and higher sustainable margins.
Directions for Further Research
This research paper will hopefully guide further research into this important area. This article draws on literature, media articles, and preliminary interview examples from the retailing industry. .Further research needs to examine conditions other than involvement that have the potential to moderate the effects of online pricing, online customers shopping behaviors and online promotions. Further research on pricing, impact of online advertising should be expanded to explore the use of etailing advertising practices. We hope that our efforts will provide a framework for future investigations and broaden the scope of research.
Conclusion
The Internet has been used for commercial purposes for several years now. We are still working to understand its impact within a competitive environment that is becoming increasingly difficult to interpret and respond to in terms of Internet strategy. We find that, when competing in online markets, firms should improve their first impact interface with customers and the way they provide information to them. E-tailers should increase their ability to offer their customers easy, quick and user friendly information, avoiding the trap of price comparison. Easy and quick access to information can be an important item of differentiation among retailers.
References:
1.Adam, S. (2001) ‘OnetoOne eMarketing Strategy Alignment:Five Internet Case Studies’, in C. Strong (ed.), Proceedingsof the Academy of Marketing 2001 (2001: A MarketingOdyssey), Cardiff University, United Kingdom, 2–4 July,(multimedia CD-ROM), 1–20.
Adam, S. and Clark, E. E. (2001) eMarketing@Internet:Connecting People and Business on the Internet, multimediaCD–ROM, 2nd edn, (v2.1), Sydney: Pearson EducationAustralia.
Adam, S. and Deans, K. R. (2000) ‘Online Business inAustralia and New Zealand: Crossing a Chasm’, in A.
Treloar and A. Ellis (eds) Proceedings of AUSWEB2K,The Sixth Australian Web Conference, Southern CrossUniversity, Cairns, 12–17 June, 19–34, online at:ausweb.scu.edu.au/aw2k/papers/adam/index.html
Bruner II, G. C. and Kumar, A. (2000) ‘Web Commercials and Advertising Hierarchy of Effects’, Journal of Advertising Research 40(1 & 2), 35–44.
Cooper, M. Does the digital divide still exist? Bush administration shrugs, but evidence says ‘Yes’. Consumers Union, 2002; www.consumerfed.org/ DigitalDivideReport20020530.pdf.
Cuban, L. Oversold and Underused: Computers in the Classroom. HarvardUniversity Press, 2003.
Hannemyr, G. The Internet as hyperbole: A critical examination of adoption rates. Information Society 19, 2 (Apr.–June 2003), 111–121.
Hoffman, D.L. and Novak, T.P. Bridging the racial divide on the Internet. Science, 280 (Apr. 17, 1998), 390–391.
Robalino, D. Social Capital, Technology Diffusion and Sustainable Growth in the Developing World. Research Report No. RGSD-151,Santa Monica, CA, Rand Corporation, 2000.
Shih, C. and Venkatesh, A. Beyond adoption: Development and application of a use-diffusion model. Journal of Marketing 68, 1 (Jan. 2004), 59–72.
Warschauer, M. Technology and Social Inclusion: Rethinking the Digital Divide. MIT Press, 2003.
Retailing to etailing.
ABSTRACT
Marketers must embrace themselves for an e-services revolution, which information technology, changing lifestyles, and demographic shifts are fueling. The current Web-based models for e-services are part of an embryonic phase preceeding an era of rapid transformation, challenge, and opportunity. To prepare for this exciting future, it is necessary to understand the varying technology landscape and the psycho-social dynamics behind consumer adoption. Making bold decisions in how to deliver e-services and learning to partner with customers is essential.
Keywords: Retailing, Etailing, Issues, Challenges and Opportunities,B2C transactions.
Introduction: Electronic retailing, also known as e-Tailing, deals with selling products and services online via the World Wide Web. The term has been used in Internet discussions as early as 1995, it seems an almost inevitable addition to e-mail, e-business, and e-commerce. E-tailing is synonymous with business-to-consumer (B2C) transaction.
E-tailing began to work for some major corporations and smaller entrepreneurs as early as 1997 when Dell Computer reported multimillion dollar orders taken at its Web site. The success of Amazon.com hastened the arrival of Barnes and Noble's e-tail site. Concerns about secure order-taking receded. 1997 was also the year in which Auto-by-Tel reported that they had sold their millionth car over the Web, and Commerce Net/Nielsen Media reported that 10 million people had made purchases on the Web. E-tailing has resulted in the development of e-tailware -- software tools for creating online catalogs and managing the business connected with doing e-tailing. A new trend is the price comparison site that can quickly compare prices from a number of different e-tailers and link you to them.
India’s online population currently stands at 25 million and is predicted to grow four fold to a 100 million by 2007. eTailing stands at Rs. 850 crores in the year 2006-07 and contributes maximum to the Online Non-Travel Industry. It is expected to be Rs 1105 crores industry at the end of 2007-08. Owing to elimination of physical costs, the category offers the best deals for low-end as well as high end products. However, many customers complain about the untimely delivery of products ordered online.
Changing lifestyles and shopping habits coupled with superior options and selections make this interactive medium most attractive to this e-generation .The opportunities of the medium to business include advertising space to strengthen brand equity coupled with lower infrastructure costs, unlimited shelf space, a global audience that can be catered to without the restrictions of time zones and working hours.
Methodology: The qualitative filed research sought to explore the nature of obstacles within the retail industry and the implications of those changes. This is a preliminary study that seeks to highlight the nature of change, rather than to empirically test that change. The discussion based around a serious of 5 interviews with senior managers, etailing consultants and 50 shoppers in Mumbai from the different area of specializations and focusing on the emerging role of the retailing sectors. Such an approach seeks to develop a broad snapshot of the changes occurring with in the industry rather than to build details case studies of individual retailers. Through those interviews it was possible to observe a dramatic transformation in the nature of etailing sectors.
Reasons for e-tailing becoming a hot opportunity can be attributed to many factors viz.
Demographics – In India’s Demographics are likely to continue to favor the Indian retail sector even over the next 10-15 years. India currently has one of the youngest populations in the world. Nearly 60% of Indians are below the age of 30 years and 40% are below 25 years. It is generally thought to be easier to alter the habits of young consumers, including in the area of shopping. Even in 2010, the estimate is for close to 40% of Indians to be below 25 years of age.
India is expected to be one of the few countries to witness a sharp increase in its work force from 2010 as the proportion of dependent population in the total population drops significantly during the next five to ten years. If gainfully employed, this increased proportion of the working-age population is likely to have significantly less free time and will probably be prepared to pay for the convenience that modern format retailing aims to deliver.
Source Internet and Mobile Association of India
No real estate costs: E-tailers do not have to maintain expensive showrooms or warehouses in prime locations. They operate through their web sites and thus save drastically on the real estate costs. The real estate costs in the metropolitan cities are sky high. Besides this, maintenance costs of a virtual store vis-à-vis a physical store is much less. These cost benefits are then passed on to the customers by offering them discounts (which actually go up to 30%). This enables the customers to get commodities at cheaper rates, which is a big attraction for them.
No Inventory hassles: The most, troublesome but critical, job of a traditional retailer is to maintain adequate inventory i.e., there should be no under stocking or overstocking for which lead times play a vital role. On the other hand web dealer has longer lead times and hence fewer inventory hassles.
Mass Media: A supermarket has limited area of operation. It caters to customers of a city (and/or its suburbs), but a web site can be accessed from any part of the country or for that matter from any part of the world, thus increasing the potential customer base.
Better interaction with the customers: One of the greatest benefits of online commerce is its ability to establish interaction en-masse. Interaction refers to the ability of reaching customers on an individual basis and react appropriately to responses of individual customers. Interaction is a vital tool for mass customization. Examples are many and include online marketing of flowers, software books and education. This has also led to greater satisfaction among the online buyers. According to a research agency, 82% of the online buyers have been found to be satisfied with their purchases.
Increase credit card usage and credit availability The increase in credit card usage has been one of the drivers of consumption in the modern retail format and is likely to continue to be so. Credit disbursements on cards and spending per card have been increasing steadily, which augurs well for consumption at modern retail stores. We estimate around 50-60% of consumers use cards for making purchases at stores. Penetration of credit cards is still low at around 13-15 cards per 1,000 people and has the potential to grow, which would further spur consumption at modern retail stores. Despite the rapid growth in credit card sales in India, penetration remains low.
Gaps in online retailing
While it is clear that consumers are adopting the Internet as a shopping medium, gaps remain between the shopping experience in the physical world and the shopping experience online. Unlike the United States which has a long cultural history of catalog shopping, but many Indian shoppers want to touch, feel and examine the product before they buy it. Cultural issues aside, consumer protection laws in India are nowhere as good as those in other countries, and online shoppers are justifiably wary about the product claims made by anonymous Internet vendors.
Weak financial structure: Three elements determine the profitability of an e-tailing operation: Average transaction size, Gross margins and Marketing costs.On each parameter, the odds are stacked against e-tailers in India. According to a study, out of the 4 million Internet users only 6% have ever shopped online. Average transaction size was a paltry Rs 272. Gross margins in 'Internet appropriate' categories of books and music are only 15-30% as compared to 60% in the US.Now, order size multiplied by the margins hardly cover marketing costs let alone any profits.
Every time an e-tailer fulfils an order he incurs a huge variable cost of 30% - 100% to deliver the goods at home. Thus the most optimistic projections suggest that ' on every Rs 100 sales that an e-tailer makes, he loses Rs 50.' E-tailers are beginning to realize that conventional retailing, which aggregated customers under one roof, still makes far better economic sense. After all, it was the customer who incurred the costs of delivering the goods.
In contrast, ensuring delivery to customers at infinite locations changes the cost of doing business completely. The marketing cost (include the cost of delivery and fulfillment) as a percentage of sales is a killing 119 %.
Mounting competitive pressures: The market for online buying is still at a nascent stage. The turnover of the sector is relatively small and many players have already entered into it. Thus many e-tailers are eyeing a small market, exerting more pressure on operating margins.
Shopping is still a touch--feel—see---hear experience: Unlike the Americans, Indians do not suffer from 'time-poverty' and shopping is still considered to be a family outing. Hence this type of an environment creates a problem of customer retention. In e-tailing, customer retention by 5% leads to increase in profits by 25%. Most people buying on the net do it out of curiosity and a repeat purchase is unlikely.
Inadequate information provided when the customers discern: Certain products like clothes, cosmetics etc. involve higher customer involvement. Most customers are comfortable buying books and music on the Internet because the information required making a purchase decision is simple.
But not so when a customer has to buy, say a blue Trouser. Here the customer wants to know: Which shade of blue is it? How does it feel on skin? How easily does it crease? This problem does not crop up in traditional retailing. In cyber space, on the other hand, the buyer is normally starved of crucial information. Only the seller knows about the true quality of trouser. This is a clear case of “information asymmetry".
Technical issues: Some of the other most frequently discussed limitations of the Internet medium for online retailing are security and privacy concerns, speed of access, disconnection during transaction, mass penetration, and lack of navigation standards.
Delivering the goods cost-effectively: At present, every single transaction challenges e-tailers to deliver the goods quickly, cheaply and conveniently. The existing model for home delivery works well for letters and flat packages but not for e-tailing’s high volumes and wide variety of package shapes and sizes. But this is largely a technical and logistical problem, and it will be possible (though perhaps expensive) to solve it by developing new sorting and scanning equipment and by deploying larger delivery vehicles.
Strategies for online retailing
Increasing consumer comfort level: While many consumers are visiting online retailers, few are buying. Online retailers need to improve convenience and value for consumers and assist them in overcoming their fears around security. Retailers must also provide reluctant consumers with compelling reasons for accepting the Internet as a new way to shop. Some of these reasons might include the use of consumer assurance brands and enhanced levels of convenience, customization, selections, service and pricing.
Effective CRM implementation: The e-business CRM connection occurs at the interaction of website and customer experience. These relationship attributes in turn influence the three main customer attitudes: customer satisfaction, trust and perceived quality. The following figure shows how the customer e-business interaction leads to customer relationship attributes, which in turn influences customer attitudes. These attitudes then lead to the CRM goals, which lead back to the customer e-business interaction.
Resolving technology limitations: Many online retailers say their ability to provide enhanced consumer experience is limited by a lack of bandwidth and problems with reliability. Advances in the technological infrastructure will enhance convenience and add a richness of experience to Internet shopping that may now be lacking.
Rapidly scaling internal operations: To respond to the rapid growth of e-commerce, online retailers and their suppliers have to scale up their internal operations. While this requires less investment than in a traditional store environment, significant management resources and investments are still required in fulfilment, customer service, and database technology and management.
Engineering comprehensive convenience: Customers cite many convenience problems with today's online retail environment. Chief among them are the need for consumers to keep re-entering personal data on different sites, the wide variation in customer service and the lack of co-ordination in multichannel retailers.
Developing low-cost distribution: Pricing at online retailers does not yet ret1ect the full potential of electronic commerce. This is partly due to the fact that Web-based fulfilment systems are still evolving. Much of online distribution piggybacks on existing offline systems. Retailers interviewed believe that more effective integration of Web-based technology would significantly reduce costs and online prices
Resolving perceived channel conflicts: Many offline retailers believe they risk cannibalizing sales in existing channels by going online.E-tailing in India can be a success if the e-tailers change their business models and comprehend their customers more. Retailers who achieve scale in their customer bases sooner rather than later will be able to reap the rewards of early investment. These rewards include the ability to develop supplemental revenue streams more easily and higher sustainable margins.
Directions for Further Research
This research paper will hopefully guide further research into this important area. This article draws on literature, media articles, and preliminary interview examples from the retailing industry. .Further research needs to examine conditions other than involvement that have the potential to moderate the effects of online pricing, online customers shopping behaviors and online promotions. Further research on pricing, impact of online advertising should be expanded to explore the use of etailing advertising practices. We hope that our efforts will provide a framework for future investigations and broaden the scope of research.
Conclusion
The Internet has been used for commercial purposes for several years now. We are still working to understand its impact within a competitive environment that is becoming increasingly difficult to interpret and respond to in terms of Internet strategy. We find that, when competing in online markets, firms should improve their first impact interface with customers and the way they provide information to them. E-tailers should increase their ability to offer their customers easy, quick and user friendly information, avoiding the trap of price comparison. Easy and quick access to information can be an important item of differentiation among retailers.
References:
1.Adam, S. (2001) ‘OnetoOne eMarketing Strategy Alignment:Five Internet Case Studies’, in C. Strong (ed.), Proceedingsof the Academy of Marketing 2001 (2001: A MarketingOdyssey), Cardiff University, United Kingdom, 2–4 July,(multimedia CD-ROM), 1–20.
Adam, S. and Clark, E. E. (2001) eMarketing@Internet:Connecting People and Business on the Internet, multimediaCD–ROM, 2nd edn, (v2.1), Sydney: Pearson EducationAustralia.
Adam, S. and Deans, K. R. (2000) ‘Online Business inAustralia and New Zealand: Crossing a Chasm’, in A.
Treloar and A. Ellis (eds) Proceedings of AUSWEB2K,The Sixth Australian Web Conference, Southern CrossUniversity, Cairns, 12–17 June, 19–34, online at:ausweb.scu.edu.au/aw2k/papers/adam/index.html
Bruner II, G. C. and Kumar, A. (2000) ‘Web Commercials and Advertising Hierarchy of Effects’, Journal of Advertising Research 40(1 & 2), 35–44.
Cooper, M. Does the digital divide still exist? Bush administration shrugs, but evidence says ‘Yes’. Consumers Union, 2002; www.consumerfed.org/ DigitalDivideReport20020530.pdf.
Cuban, L. Oversold and Underused: Computers in the Classroom. HarvardUniversity Press, 2003.
Hannemyr, G. The Internet as hyperbole: A critical examination of adoption rates. Information Society 19, 2 (Apr.–June 2003), 111–121.
Hoffman, D.L. and Novak, T.P. Bridging the racial divide on the Internet. Science, 280 (Apr. 17, 1998), 390–391.
Robalino, D. Social Capital, Technology Diffusion and Sustainable Growth in the Developing World. Research Report No. RGSD-151,Santa Monica, CA, Rand Corporation, 2000.
Shih, C. and Venkatesh, A. Beyond adoption: Development and application of a use-diffusion model. Journal of Marketing 68, 1 (Jan. 2004), 59–72.
Warschauer, M. Technology and Social Inclusion: Rethinking the Digital Divide. MIT Press, 2003.
LUXURY BRANDS: Creating a cut above the rest
Introduction
LUXURY is no stranger to India. The maharajas and princes have led a life of opulence. But the only way to be associated with it was to be lucky enough to have it in one’s heritage. Luxury then was associated with hunting, polo and other activities of the rich. It was an unwritten rule that the “Aspires” cannot climb up to the “Globals” segment. The Princes operated in a different league altogether. The era of the self-made millionaire was yet to arrive. An achiever of the 1970s could only get by with a good foam mattress — no Omega, Rolex or BMWs.
It was in 1980s that Luxury Brands saw themselves into upper class homes through small things and symbols also through “aunties and uncles” having brought a gift from their first trip abroad. The concept of luxury as a reward for achievement gained acceptance, though royalty and the aristocracy continued to remain the benchmark of the elite.
The real change came in the 1990s when more people started making more money. What contributed to this shift? India opened up to the world. The liberalization process brought more than high economic growth rates. It showed the people what was possible. In the process, it has altered mindsets. The IT revolution, and the consequent demand for Indian brainpower, has created a whole new breed of wealthy global Indians. At the other end, an increasingly open economy has created new business opportunities, which has resulted in a slew of new, extremely successful first generation businessmen. They are millionaires. They spend. They sport Vertu mobiles. But they may not even be comfortable with English. All of a sudden, wealth is no longer the preserve of the elite. Mr Keegan Paes, the store manager of JBL, an US based home and car audio provider company, says that they have Indian customers who are ready to buy car audio systems that are in the range of five lakhs rupees.
Finally, one need not go all the way to Paris when the brands are available in places such as The Taj or The Trident, one need not use smuggled stuff or wait for their “not so favorite uncle and aunty” to go abroad and get their favorite brands.
Luxury – Redefined.
Although a brand may be perceived as luxurious, consumers and researchers have recognised that not all luxury brands are deemed equally luxurious. 'Luxury is particularly slippery to define. A strong element of human involvement, very limited supply and the recognition of value by others are key components ... So between premium and luxury, in marketing terms is a Cadillac and a Rolls-Royce may be both perceived as luxury cars, but one compared with the other would be considered more luxurious. In this case, the Rolls-Royce could be assumed to be more luxurious than the Cadillac. The perception of what is and is not a luxury brand, as well as the amount of luxury contained in a brand, may be dependent on the context and the people concerned.
To the point now “what is luxury?” ---Each to its Own…..Really? Let’s think about it again? If it was that, then one would not be bothered that “I can’t wear a Swatch since my subordinate has it--- I need a Cartier now”. For example, Raymonds has launched the Chairman collection specially to outfit the cream of the crop. A typical fabric in this collection costs anywhere between Rs 50,000 to Rs 1,50,000 per meter.
In marketing parlance luxury is nothing but “the art of pampering a consumer’s senses and ego overtly”, the latter part becomes very important in developing countries like India where the new rich want to announce their arrival and the new rich want to separate themselves from the new. A luxury brand is all about image; the product does not matter so much. It is about the feel good factor, celebrating one’s success and aspiring to reach out for more…..Harry Winston a US based jewellery brand is soon planning to launch it’s outlet in India. On display will be jewellery and watches. One of the watches that will be on display costs around rupees fifty seven lakhs.
Moreover luxury is no longer limited to apparels, accessories, automobiles and the likes…but has also extended to categories such as Food and Beverages. Like, a brand of salt White Rose is available for rupees 2400 per kg and in Metro AG sells branded Mushroom Truffle are available for Rs. 1.5 Lakhs per kg.!!!! In the beverage segment a vintage wine called a bend in the river is available at Rs. 30 lakhs per bottle!
Dimensions of LUXURY brands
These are the five key luxury dimensions that must be established or monitored for creating a lasting luxury brand. It is expected that different sets of consumers would have different perceptions of the level of luxury for the same brands, and that the overall luxury level of a brand would integrate these perceptions from different perspectives.
Perceived conspicuousness: The consumption of luxury brands may be important to individuals in search of social representation and position. This means that social status associated with a brand is an important factor in conspicuous consumption. Furthermore, consumers who perceive price as a proxy for quality often perceive high price as an indicator of luxury.73 Hence the measure of conspicuousness includes items such as 'extremely expensive' or 'for wealthy' that tap into perceptions of price and social status associated with the brand.
Perceived uniqueness: Scarcity or limited supply of products enhances consumers' preferences for a brand. when Consumers are searching for something that is difficult to obtain (for example, a Louis Vuitton handbag). Uniqueness is sought to enhance one's self-image and social image by adhering to one's personal taste, or breaking the rules, or avoiding similar consumption. The uniqueness dimension is based on the assumptions that perceptions of exclusivity arid rarity enhance the desire for a brand, and that this desirability is increased when the brand is also perceived as expensive. A luxury brand that would be difficult to find because of its uniqueness (such as a limited edition), and which would be expensive compared to normal standards (for example, a Jaguar car), would be even more valuable.
Perceived extended self : Consumers may use luxury brands to classify or distinguish themselves in relation to relevant others, but they may also try to integrate the symbolic meaning into their own identity. Social referencing and the construction of one's self appears to be determinant in luxury consumption. The possession of luxury brands may be more appreciated by consumers who are highly materialistic and susceptible to interpersonal influence.
Perceived hedonism : Luxury-seekers are considered hedonic consumers when they are looking for personal rewards and fulfilment acquired through the purchase and consumption of products evaluated for their subjective emotional benefits and intrinsically pleasing properties, rather than functional benefits.
Perceived quality: It is expected that luxury brands offer superior product qualities and performance compared with non-luxury brands. Perfectionist consumers may perceive more value from a luxury brand because they may assume that it will have a greater brand quality and reassurance. Consumers influenced by the quality dimension of luxury may perceive that luxury brands have superior characteristics compared with nonluxury brands. These characteristics may include, but are not restricted to: technology, engineering, design, sophistication and craftsmanship. For instance, speed and acceleration for a luxury car or precision for a luxury watch are elements reflecting the perceptions of quality
Challenges for Luxury Brands
The ideal location--- Not yet arrived!!!: Though the luxury brands are keen and have every reason to enter India but the main question faced is “where they should be located?” Brands such as Jimmy Choo, Chanel and Christian Dior have found their place in 5 star luxury hotels like The Taj Mahal,Hilton Hotels in Mumbai. However, hotels are hardly the ideal space to shop for luxury brands as they lack the space, variety and atmosphere that a luxury shopping experience warrants. The concept of luxury high streets and luxury malls is yet to catch on in India.
We are at lesser price, in more variety abroad!!: One of the major roadblocks for these brands is, they are available at a much lesser price and also in greater variety abroad. The prices are much less abroad as they carry import duty, currently at 35% and in case of luxury watches it is as high as 50%. Italian fashion house Ermenegildo Zegna says India's luxury market is at least 10-15 years behind China's, and primarily due to a much higher duty structure. Joseph Wan, Group Chief Executive for Harvey Nichols, the London-based retailer, says India's recent economic growth and indications that New Delhi is prepared to liberalize its markets are encouraging, but adds that prime real estate in Indian cities is too expensive and that tariffs are prohibitively steep. "Harvey Nichols caters to the top 3% of the population, and that 3% are very well-traveled," says Wan. "If my Dolce & Gabbana in India has to be more expensive because of import duties, how can I do any business? You just can't. Also India’s existing FDI policy which limits the foreign ownership in ventures has discouraged a number of luxury brands from establishing a significant presence in the country.
The Long wait..: Another challenge for a brand in this category is to sustain its exclusivity & pricing in the long run. And that is the reason why we do not have our own genuine high end brand. Often, brands start premium, but quickly trickle down to cater the junta. The temptation to give in to lower prices is way too high. Patience & commitment are two essential factors for a brand to create its own niche market.
The Indian Market is “different”: Although, the craze for luxury brands is catching up in India & China, the luxury market in India is driven by a different set of rules. Players in this field are now feeling the need to modify & customise their products before catering to the Indian elites. For instance, both Audi and Sweden based Volvo have made their cars tougher and more suitable for the Indian roads. “Veze” from Versace has plans to roll out something exclusive for the Indian market. Also, Louis Vuitton,has not launched its ready to wear yet in India, as the CEO, Yves Carcelle feels that Indian women still prefer wearing saris to parties.
Forces behind the Luxury Brands:
Emerging Retail Avenues: New retailing opportunities are also quietly revolutionizing the format of luxury retailing. Luxury boutiques were traditionally confined to the secure but often inaccessible surroundings of exclusive hotels. The shopping mall boom is set to democratize luxury consumption. With pioneering projects such as the opening of the Delhi luxury-goods mall, Emporio, and UB City, Bangalore, shoppers will be overwhelmed by over 70 international high-end brands, but also immersed in a pleasurable and memorable shopping experience.
Media Exposure:The significant increase of media exposure is helping to instill and forge positive brand images. Zenith Optimedia reports that advertising expenditures in India increased from US$1.1 billion in 1996 to US$4.7 billion in 2006. Forecasts suggest that advertising spending will exceed $7billion in 2009. Increased product knowledge and brand awareness are translating into greater consumer confidence – an important catalyst for luxury consumption in a fast-emerging market.
Increasing no. of “Indian Globals”
McKinsey forecasts that the Indian middle class (defined as those with disposable incomes from 200 thousand to 1 million rupees a year) will increase from approximately
5% to 41% of the population and will become the world’s fifth largest consumer market by 2025. Indeed, the desire for international brands is also driving consumption abroad. According to a study by Visit London, Indian visitors to London spent more than Japanese tourists.
Merrill Lynch and CapGemini’s World Wealth Report 2008 says India, China and Brazil had the highest high net-worth individual (HNI) growth at the country level. Not just that, in 2007, India actually led the world in HNI population growth at 22.7 per cent, exceeding gains of 20.5 per cent in 2006.
Market regulation : Although high import duties on luxury goods continue to prevail, India’s policy of liberalization and deregulation has improved its image as an attractive destination for foreign investment. Foreign companies that sell products under a single brand, such as Ermenegildo Zegna, have recently been allowed to acquire up to 51% in Indian joint ventures. The introduction of market reforms is winning over the long-term commitment of foreign investors.
Looking beyond the obvious : Luxury brands in India need to look beyond South Delhi and South Mumbai. There are about 16 lakh homes in India that annually spend atleast Rs 4 lakh on premium and luxury products and services. Alongside, there is another emerging India, of 400 million upper middle class, with rising disposable incomes and big aspirations. But are luxury brands missing the opportunity? The answer may be no as a luxury brand like Swaroski is planning to have its boutiques in cities like Surat and Ahmedabad to tap this market.
With a whole new lot there waiting to be tapped, experts believe that dynamics of Indian luxury market are set to change. Where it may be early for the luxury brands to set up retail space in small rich towns, direct mailers and relationship building might be the need of the hour. In India the expatriate population is on the rise thus, giving one more reason for the luxury brands to come and stay here.
Conclusion: Luxury is arrived, to stay, to grow and to flourish……though there lay ahead no. of challenges for luxury brands in India but they are definitely the lambi race ka ghoda as India is considered to be the land of youth, of growing millionaires and a land which is been eyed by the Global World as the Super Power by 2032 according to the BRIC report.
Allure the new rich, delight the old rich, pamper them both and have a long , long stay!!!!!!
References
(1) Aaker, D. (1991) 'Managing Brand Equity: Capitalizing on the Value of a Brand Name', Free Press, New York, NY.
(2) Keller, K. L. (1991) 'Conceptualizing, measuring and managing customer-based brand equity', Journal of Marketing, Vol. 57, No. 1, pp. 1-22.
(3) Aaker, J. L. (1997) 'Dimensions of brand personality', Journal of Marketing Research, Vol. 34, August, pp. 347-356.
(4) McKinsey Corporation (1990) 'The Luxury Industry: An Asset for France', McKinsey, Paris, France.
(5) Silverstein, M. J. and Fiske, N. (2003) 'Luxury for the masses', Harvard Business Review, Vol. 81, No. 4, pp. 48-57.
(6) Dubois, B. and Duquesne, P. (1993a) 'Polarization maps: A new approach to identifying and assessing competitive position - The case of luxury brands', Marketing and Research Today, Vol. 21, May, pp. 115-123.
(7) Roux, E. (1991) 'Comment se positionnent les marques de luxe', Revue Française du Marketing, Vol. 132/133, Nos 2-3, pp. 111-118.
(8) Lichtenstein, D. R., Ridgway, N. M. and Netemeyer, R. G. (1993) 'Price perceptions and consumer shopping behavior: A field study', Journal of Marketing Research, Vol. 30, May, pp. 234-245.
(9) Allérès, D. (1991) 'Spécificités et strategies marketing des différents univers du luxe', Revue française du Marketing, Vol. 133, Nos 2/3, pp. 71-97.
(10) Kapferer, J.-N. (1997) 'Managing luxury brands', Journal of Brand Management, Vol. 4, No. 4, pp. 251-260.
(11) Dubois, B. and Duquesne, P. (1993b) 'The market for luxury goods: Income versus culture', European Journal of Marketing, Vol. 27, No. 1, pp. 35-44.
(12) Franck Vigneron, Lester W Johnson. Measuring perceptions of brand luxury Journal of Brand Management. London: Jul 2004. Vol. 11, Iss. 6; pg. 484, 23 pgs
LUXURY is no stranger to India. The maharajas and princes have led a life of opulence. But the only way to be associated with it was to be lucky enough to have it in one’s heritage. Luxury then was associated with hunting, polo and other activities of the rich. It was an unwritten rule that the “Aspires” cannot climb up to the “Globals” segment. The Princes operated in a different league altogether. The era of the self-made millionaire was yet to arrive. An achiever of the 1970s could only get by with a good foam mattress — no Omega, Rolex or BMWs.
It was in 1980s that Luxury Brands saw themselves into upper class homes through small things and symbols also through “aunties and uncles” having brought a gift from their first trip abroad. The concept of luxury as a reward for achievement gained acceptance, though royalty and the aristocracy continued to remain the benchmark of the elite.
The real change came in the 1990s when more people started making more money. What contributed to this shift? India opened up to the world. The liberalization process brought more than high economic growth rates. It showed the people what was possible. In the process, it has altered mindsets. The IT revolution, and the consequent demand for Indian brainpower, has created a whole new breed of wealthy global Indians. At the other end, an increasingly open economy has created new business opportunities, which has resulted in a slew of new, extremely successful first generation businessmen. They are millionaires. They spend. They sport Vertu mobiles. But they may not even be comfortable with English. All of a sudden, wealth is no longer the preserve of the elite. Mr Keegan Paes, the store manager of JBL, an US based home and car audio provider company, says that they have Indian customers who are ready to buy car audio systems that are in the range of five lakhs rupees.
Finally, one need not go all the way to Paris when the brands are available in places such as The Taj or The Trident, one need not use smuggled stuff or wait for their “not so favorite uncle and aunty” to go abroad and get their favorite brands.
Luxury – Redefined.
Although a brand may be perceived as luxurious, consumers and researchers have recognised that not all luxury brands are deemed equally luxurious. 'Luxury is particularly slippery to define. A strong element of human involvement, very limited supply and the recognition of value by others are key components ... So between premium and luxury, in marketing terms is a Cadillac and a Rolls-Royce may be both perceived as luxury cars, but one compared with the other would be considered more luxurious. In this case, the Rolls-Royce could be assumed to be more luxurious than the Cadillac. The perception of what is and is not a luxury brand, as well as the amount of luxury contained in a brand, may be dependent on the context and the people concerned.
To the point now “what is luxury?” ---Each to its Own…..Really? Let’s think about it again? If it was that, then one would not be bothered that “I can’t wear a Swatch since my subordinate has it--- I need a Cartier now”. For example, Raymonds has launched the Chairman collection specially to outfit the cream of the crop. A typical fabric in this collection costs anywhere between Rs 50,000 to Rs 1,50,000 per meter.
In marketing parlance luxury is nothing but “the art of pampering a consumer’s senses and ego overtly”, the latter part becomes very important in developing countries like India where the new rich want to announce their arrival and the new rich want to separate themselves from the new. A luxury brand is all about image; the product does not matter so much. It is about the feel good factor, celebrating one’s success and aspiring to reach out for more…..Harry Winston a US based jewellery brand is soon planning to launch it’s outlet in India. On display will be jewellery and watches. One of the watches that will be on display costs around rupees fifty seven lakhs.
Moreover luxury is no longer limited to apparels, accessories, automobiles and the likes…but has also extended to categories such as Food and Beverages. Like, a brand of salt White Rose is available for rupees 2400 per kg and in Metro AG sells branded Mushroom Truffle are available for Rs. 1.5 Lakhs per kg.!!!! In the beverage segment a vintage wine called a bend in the river is available at Rs. 30 lakhs per bottle!
Dimensions of LUXURY brands
These are the five key luxury dimensions that must be established or monitored for creating a lasting luxury brand. It is expected that different sets of consumers would have different perceptions of the level of luxury for the same brands, and that the overall luxury level of a brand would integrate these perceptions from different perspectives.
Perceived conspicuousness: The consumption of luxury brands may be important to individuals in search of social representation and position. This means that social status associated with a brand is an important factor in conspicuous consumption. Furthermore, consumers who perceive price as a proxy for quality often perceive high price as an indicator of luxury.73 Hence the measure of conspicuousness includes items such as 'extremely expensive' or 'for wealthy' that tap into perceptions of price and social status associated with the brand.
Perceived uniqueness: Scarcity or limited supply of products enhances consumers' preferences for a brand. when Consumers are searching for something that is difficult to obtain (for example, a Louis Vuitton handbag). Uniqueness is sought to enhance one's self-image and social image by adhering to one's personal taste, or breaking the rules, or avoiding similar consumption. The uniqueness dimension is based on the assumptions that perceptions of exclusivity arid rarity enhance the desire for a brand, and that this desirability is increased when the brand is also perceived as expensive. A luxury brand that would be difficult to find because of its uniqueness (such as a limited edition), and which would be expensive compared to normal standards (for example, a Jaguar car), would be even more valuable.
Perceived extended self : Consumers may use luxury brands to classify or distinguish themselves in relation to relevant others, but they may also try to integrate the symbolic meaning into their own identity. Social referencing and the construction of one's self appears to be determinant in luxury consumption. The possession of luxury brands may be more appreciated by consumers who are highly materialistic and susceptible to interpersonal influence.
Perceived hedonism : Luxury-seekers are considered hedonic consumers when they are looking for personal rewards and fulfilment acquired through the purchase and consumption of products evaluated for their subjective emotional benefits and intrinsically pleasing properties, rather than functional benefits.
Perceived quality: It is expected that luxury brands offer superior product qualities and performance compared with non-luxury brands. Perfectionist consumers may perceive more value from a luxury brand because they may assume that it will have a greater brand quality and reassurance. Consumers influenced by the quality dimension of luxury may perceive that luxury brands have superior characteristics compared with nonluxury brands. These characteristics may include, but are not restricted to: technology, engineering, design, sophistication and craftsmanship. For instance, speed and acceleration for a luxury car or precision for a luxury watch are elements reflecting the perceptions of quality
Challenges for Luxury Brands
The ideal location--- Not yet arrived!!!: Though the luxury brands are keen and have every reason to enter India but the main question faced is “where they should be located?” Brands such as Jimmy Choo, Chanel and Christian Dior have found their place in 5 star luxury hotels like The Taj Mahal,Hilton Hotels in Mumbai. However, hotels are hardly the ideal space to shop for luxury brands as they lack the space, variety and atmosphere that a luxury shopping experience warrants. The concept of luxury high streets and luxury malls is yet to catch on in India.
We are at lesser price, in more variety abroad!!: One of the major roadblocks for these brands is, they are available at a much lesser price and also in greater variety abroad. The prices are much less abroad as they carry import duty, currently at 35% and in case of luxury watches it is as high as 50%. Italian fashion house Ermenegildo Zegna says India's luxury market is at least 10-15 years behind China's, and primarily due to a much higher duty structure. Joseph Wan, Group Chief Executive for Harvey Nichols, the London-based retailer, says India's recent economic growth and indications that New Delhi is prepared to liberalize its markets are encouraging, but adds that prime real estate in Indian cities is too expensive and that tariffs are prohibitively steep. "Harvey Nichols caters to the top 3% of the population, and that 3% are very well-traveled," says Wan. "If my Dolce & Gabbana in India has to be more expensive because of import duties, how can I do any business? You just can't. Also India’s existing FDI policy which limits the foreign ownership in ventures has discouraged a number of luxury brands from establishing a significant presence in the country.
The Long wait..: Another challenge for a brand in this category is to sustain its exclusivity & pricing in the long run. And that is the reason why we do not have our own genuine high end brand. Often, brands start premium, but quickly trickle down to cater the junta. The temptation to give in to lower prices is way too high. Patience & commitment are two essential factors for a brand to create its own niche market.
The Indian Market is “different”: Although, the craze for luxury brands is catching up in India & China, the luxury market in India is driven by a different set of rules. Players in this field are now feeling the need to modify & customise their products before catering to the Indian elites. For instance, both Audi and Sweden based Volvo have made their cars tougher and more suitable for the Indian roads. “Veze” from Versace has plans to roll out something exclusive for the Indian market. Also, Louis Vuitton,has not launched its ready to wear yet in India, as the CEO, Yves Carcelle feels that Indian women still prefer wearing saris to parties.
Forces behind the Luxury Brands:
Emerging Retail Avenues: New retailing opportunities are also quietly revolutionizing the format of luxury retailing. Luxury boutiques were traditionally confined to the secure but often inaccessible surroundings of exclusive hotels. The shopping mall boom is set to democratize luxury consumption. With pioneering projects such as the opening of the Delhi luxury-goods mall, Emporio, and UB City, Bangalore, shoppers will be overwhelmed by over 70 international high-end brands, but also immersed in a pleasurable and memorable shopping experience.
Media Exposure:The significant increase of media exposure is helping to instill and forge positive brand images. Zenith Optimedia reports that advertising expenditures in India increased from US$1.1 billion in 1996 to US$4.7 billion in 2006. Forecasts suggest that advertising spending will exceed $7billion in 2009. Increased product knowledge and brand awareness are translating into greater consumer confidence – an important catalyst for luxury consumption in a fast-emerging market.
Increasing no. of “Indian Globals”
McKinsey forecasts that the Indian middle class (defined as those with disposable incomes from 200 thousand to 1 million rupees a year) will increase from approximately
5% to 41% of the population and will become the world’s fifth largest consumer market by 2025. Indeed, the desire for international brands is also driving consumption abroad. According to a study by Visit London, Indian visitors to London spent more than Japanese tourists.
Merrill Lynch and CapGemini’s World Wealth Report 2008 says India, China and Brazil had the highest high net-worth individual (HNI) growth at the country level. Not just that, in 2007, India actually led the world in HNI population growth at 22.7 per cent, exceeding gains of 20.5 per cent in 2006.
Market regulation : Although high import duties on luxury goods continue to prevail, India’s policy of liberalization and deregulation has improved its image as an attractive destination for foreign investment. Foreign companies that sell products under a single brand, such as Ermenegildo Zegna, have recently been allowed to acquire up to 51% in Indian joint ventures. The introduction of market reforms is winning over the long-term commitment of foreign investors.
Looking beyond the obvious : Luxury brands in India need to look beyond South Delhi and South Mumbai. There are about 16 lakh homes in India that annually spend atleast Rs 4 lakh on premium and luxury products and services. Alongside, there is another emerging India, of 400 million upper middle class, with rising disposable incomes and big aspirations. But are luxury brands missing the opportunity? The answer may be no as a luxury brand like Swaroski is planning to have its boutiques in cities like Surat and Ahmedabad to tap this market.
With a whole new lot there waiting to be tapped, experts believe that dynamics of Indian luxury market are set to change. Where it may be early for the luxury brands to set up retail space in small rich towns, direct mailers and relationship building might be the need of the hour. In India the expatriate population is on the rise thus, giving one more reason for the luxury brands to come and stay here.
Conclusion: Luxury is arrived, to stay, to grow and to flourish……though there lay ahead no. of challenges for luxury brands in India but they are definitely the lambi race ka ghoda as India is considered to be the land of youth, of growing millionaires and a land which is been eyed by the Global World as the Super Power by 2032 according to the BRIC report.
Allure the new rich, delight the old rich, pamper them both and have a long , long stay!!!!!!
References
(1) Aaker, D. (1991) 'Managing Brand Equity: Capitalizing on the Value of a Brand Name', Free Press, New York, NY.
(2) Keller, K. L. (1991) 'Conceptualizing, measuring and managing customer-based brand equity', Journal of Marketing, Vol. 57, No. 1, pp. 1-22.
(3) Aaker, J. L. (1997) 'Dimensions of brand personality', Journal of Marketing Research, Vol. 34, August, pp. 347-356.
(4) McKinsey Corporation (1990) 'The Luxury Industry: An Asset for France', McKinsey, Paris, France.
(5) Silverstein, M. J. and Fiske, N. (2003) 'Luxury for the masses', Harvard Business Review, Vol. 81, No. 4, pp. 48-57.
(6) Dubois, B. and Duquesne, P. (1993a) 'Polarization maps: A new approach to identifying and assessing competitive position - The case of luxury brands', Marketing and Research Today, Vol. 21, May, pp. 115-123.
(7) Roux, E. (1991) 'Comment se positionnent les marques de luxe', Revue Française du Marketing, Vol. 132/133, Nos 2-3, pp. 111-118.
(8) Lichtenstein, D. R., Ridgway, N. M. and Netemeyer, R. G. (1993) 'Price perceptions and consumer shopping behavior: A field study', Journal of Marketing Research, Vol. 30, May, pp. 234-245.
(9) Allérès, D. (1991) 'Spécificités et strategies marketing des différents univers du luxe', Revue française du Marketing, Vol. 133, Nos 2/3, pp. 71-97.
(10) Kapferer, J.-N. (1997) 'Managing luxury brands', Journal of Brand Management, Vol. 4, No. 4, pp. 251-260.
(11) Dubois, B. and Duquesne, P. (1993b) 'The market for luxury goods: Income versus culture', European Journal of Marketing, Vol. 27, No. 1, pp. 35-44.
(12) Franck Vigneron, Lester W Johnson. Measuring perceptions of brand luxury Journal of Brand Management. London: Jul 2004. Vol. 11, Iss. 6; pg. 484, 23 pgs
Friday, January 16, 2009
The Changing Paradigm - Indian Retail Perspective
Organized Retailing has played a major role world over in contributing to the nation’s GDP and in providing opportunities for skilled employment. This can be best seen in countries like U.S.A., U.K., Mexico, Brazil, Thailand, Malaysia Hong Kong, Sri Lanka, Dubai and more recently China. Organized Retailing is the second largest industry in the United States both in terms of the number of establishments and also in terms of employment.
Today retail sector exhibits a highly fragmented market structure with more than 12 million retail outlets. It has the highest retail density in the world. In terms of ownership, it primarily consists of independent, owner managed shops. The retail business includes a variety of traditional retail formats e.g. kirana stores where the basic necessities of life -- grocery are available. The value proposition, of these stores is HIGH SERVICE ORIENTATION, (which is personalized customer service) and coupled with LOW PRICES.
The organized retail format in India has its origin in Mumbai with the first retail shop being APNA BAZAR—a low cost – catering generally to the middle class population, followed by AKBARALLYS—a medium cost – catering generally to the then elite segment. The retail segment is expected to grow @12-15% in the next 5 years (i.e. by 2010) from abase level of Rs. 1800 Billion (in 2002). This in turn would drive the other sectors like infrastructure, employment etc. The organized retail sector addresses issues like the changing consumer behavior and focuses on the new emerging consumer segments like the “aspirants and the climbers”. The availability of funds coupled with an increasing per capita income (mainly for the middle and the upper class sections of the population), the media push – creating greater awareness – of the various brands and the products available, the ease with which consumers can travel to foreign destinations, and the increasing inbound tourist destinations are the major drivers of the retail sector.
Today, India's retail market totals $330bn, after growing for 10% on an average over the past five years1. Organised retail is only 3% of the total market Retailing contributes to about 14% of India’s GDP and is the second largest employer, employing about 8% of the population. There are about 120 lakh retail outlets with an average size of a unit being less than 500 sq. ft. These vital statistics have led A.T. Kearney to rank India as the most attractive retail destination in 20063.
Indian retail industry is witnessing a fast paced revamping exercise where the traditional formats are making way for modern formats like departmental stores, hypermarkets, supermarkets, specialty stores & Western-style malls, which are appearing in metros and second-rung cities alike.
The foremost reason for this sea of change is the burgeoning middle class with a good amount of disposable income. At the start of 1999, the size of the middle class was unofficially estimated at 300 million people. The middle class including upper middle, middle-middle and lower middle classes, is expected to grow by 5% to 10% annually 4. A large young working population with median age of 24 years, nuclear families in urban areas, along with increasing working-women population and emerging opportunities in the services sector are among other reasons.
According to the widely discussed Goldman Sachs BRIC report of October 2003, “Over the next 50 years India could emerge as the world’s third largest economy.”
However, behind this rosy picture, lies a mountain of challenges. The economy being in a developing phase poses structural support shortage. Also, heavy initial investments are required by large retailers, and break even is difficult to achieve, so many of the top players have not tasted success so far.
But the future is promising; the market is growing, government policies are becoming favorable and emerging technologies are facilitating operations.
Indian Retail challenges?
The sudden speed picked up by the retail juggernaut has left the support infrastructure in a state of inertia. The challenges identified are:
Infrastructural problems:
Shortage of retail space The traditional realty players don’t have retail property development experience as reflected in their exterior focused design and improper tenant mix. The shortage is mostly visible in the larger metros due to the mall revolution & lack of town planning. Owing to space scarcity in major metros many retailers are entering tier 2 & tier 3 cities. 6
Unless real estate costs lower, retailers would take a long time to break-even.
Supply Chain & Logistics infrastructure Rs.50,000 crore worth of food produce is wasted in India each year due of lack of a robust supply chain infrastructure. This causes logistics costs to be 10-12% of the GDP. Absence of efficient logistics companies forces retailers to incur huge costs to set up individual SCM & logistics infrastructure.
Measures of supply chain efficiency- inventory turns ratio & stock availability at stores. While global retailer 7-Eleven has a stock turn of 50, India hangs between 4-10. Also, stock-out levels among Indian retailers lies from 5 to 15%, when the global average is less than 5% 7.
Increasing emphasis on providing value-added services is creating the demand for trained people (8mn new jobs over next 5-6 years). The availability of suitable candidates to handle organised retailing, new sales systems and processes is scarce and the education system is not geared up to it. Also there is no grassroot-level training facility for retail services. Significant competency gaps are seen in- Supply chain, customer relations, merchandising, facilities management and vendor development.
Ø Inconsiderate Regulatory Framework: A retailer requires around 12 to 15 clearances at the Central, state and local level to set up operations because there is no single window clearance process. The provisions of ‘The Shops and Establishments Act’ also vary. There are various restrictions on interstate movement of goods, especially food grains.
Ø Indian retail industry is greatly fragmented compared to other the developed and developing countries. Only 3% of total Indian retail is organised. Fragmented market results in high inventory levels, high proportion of retail business taking place in the ‘unorganized’ rural areas. India is witnessing oversupply from unorganized formats like kirana & paanwalas. Around 4.3m outlets cater to 1.2bn people, i.e. 280-persons per outlet as against the global average of 1,800-persons per outlet. The Chinese & Vietnamese retail markets too suffered from small-scale, fragmented, provincial operating models.
Ø Most Indian retailers are still uncertain about benefits of technology. Retail IT budget in India is currently 1% of total spends which is lower than US spends. Significant IT investments are needed in merchandise planning, distribution management and POS to capture & analyse customer data . While Indian retailers are still to adopt bar coding, Wal-Mart and Metro are experimenting with Radio Frequency Identification technology. There is high dependency on few consultants & vendors are not IT-savvy.
Ø Limited FDI is depriving India of the resultant consolidation in the sector because foreign retailers provide employment, spend more on marketing, advertising, bulk purchases; have wealth of retail experience from developed retail markets, introduce larger product variety & improved shopping experience. This will also aggregate demand, bypass the existing intermediary system, invest in the supply chain, ensure lower prices to end-customers and higher returns to farmers.
Ø India is diversified, ethnically and culturally, posing a challenge for Indian players wishing to set up a national chain or brand. It leads to product proliferation and stocking larger number of SKU’s at stores, complexity in sourcing & planning, which in turn increases management costs. Foreign players wanting to enter India too have to think twice before deciding to step in.
Ø Untapped Rural potential:
"India's greatest need is to take the benefit of retailing to the doorstep of the farmer," ITC chairman YC Deveshwar says.
70% of India lives in villages & consumes over one third of most durable and non-durable products. Retailing in rural India is a different ball game because before targeting a share of their wallet, the Indian rural market requires an income propeller.
In China (2004) too the Ministry of Commerce has realised the rural potential and by 2009 will build a rural retail network .
Ø Availability of skilled personnel
The non-availability of trained personnel especially at the managerial level is one of the key challenges to this sector. The ability to hire and retain quality manpower will be one of the most important success factors for this industry
The Drivers of Growth of the Organized Retailing Sector.
Providing Quality Real Estate:The government is easing land regulations and releasing land for retail. Rs.8 trillions is being invested in real estate in coming 5 years 19. Retailers are foraying into retail property development & mall management. E.g. Rahejas, DLF, Pantaloon, Provogue, etc. Pantaloon Retail’s Rs3.5bn fund- ‘Kshitij’ and foreign fund ‘Horizon’- US $350m, will develop 51 retail properties10. Another booster is entry of foreign players and provision for 100% FDI in real estate for townships for retail with floor space of over 5,00,000 sq. ft .
Foreign Direct Investment (FDI) in India
FDI is a concept wherein a foreign partner invests directly in a company. This investment would be for the purpose of getting a higher dividend or for getting managerial control in the company. Normally a direct investment in a retailer organization gives the foreign investor a controlling interest in the domestic company. The presence of a foreign investor normally is a win -- win situation for both the investor as well as the recipient country.
In addition FDI may also be used to access certain markets or resources. (Example: in areas like extracting raw material, growing crops and even operations in the service industry. Some of the well-known examples where FDI has been used in the service industry would be De Beers in diamond extraction, Pepsi in the Food and Beverages sector of the retail industry and AIG in the insurance industry.
FDI is a very important means of economic growth for any country. The amount of FDI entering into the country is dependant on broadly two factors:
Ø Internal Factors (e.g. government policies)
Ø External factors (e.g. competitive environment).
However some obstacle still remains in the path of attracting FDI to India. (e.g. reliable regular sufficient power, good roads and correspondingly good transport networks). It is estimated that more than 40% of the perishable goods are lost due to non-availability of refrigerated vans and bad roads. Additionally the fear is that the presence of FDI would drive out the ‘Mom and Pop’ shops and cause loss of employment as seen in USA.
In spite of these obstacles, a World Bank Study on FDI in India has suggested that opening of FDI in the retail sector in India would be beneficial both in terms of technological inputs, new products and also employment generation on lines similar to the IT sector. The benefit of allowing FDI in India can be seen through the benefits that China has reaped by allowing FDI up to 49% in this sector. In India with the per capita consumption being quite low, it is difficult to imagine the Mom and Pop shops being driven out. Most of these Mom and Pop shops satisfy the “locality” requirements rather than the convenience requirement.
The main drivers of the organized Retailing Sector can be identified as follows:
Ø Rising Income Level
The profile of the Indian customer is continuously changing. This change can be seen the figure given below.
Shift in the profile of the Indian Customer
It is estimated that the consuming class and the climbers are expected to grow from a level of 120.8 million households (in 2001- 02) to a level of 157.2 million households (in 2006-07) thus registering a growth of 5.5% p.a.
The Marketing Whitebook has estimated that out of the total consuming class and the consumer class, almost 56% (~ 46 million) is expected to be concentrated in urban India. The proportion of the consuming class and the climbers in the urban markets are likely to drive the demand significantly especially for lifestyle products.
Ø Young Population with high disposable Income
According to KSA Technologies, India has the lowest median age of 24 for over 1000 million populations when compared with the other populous countries like China, USA and UK. This young population by virtue of its mere size would drive the consumption pattern as this group has the ability and willingness to spend. Fig. 6 & 70 demonstrates this amply.
The changing pattern of households by income
The changing size of the population especially in the age group of 20 – 34 years is very clearly depicted in following figure. This class is the relevant class for the retail industry and is growing very rapidly.
The changing demographics in India.
Ø Availability of Brands and Merchandise
Consumerism and brand proliferation has been another enabler for organized retailing in India. Most of the world’s largest and leading brands are currently available in India. For e.g. Louis Philippe, Van Huesen, L’Oreal, Peppe, Arrow, Tommy Hilfiger etc.
Ø Media Proliferation
The presence of a large number of media and the corresponding exposures has led to the increase in consumer spending especially on apparels.
Ø Availability of Real Estate
Availability of the real estate is one of the biggest drivers of the organized retail sector. According to M/s Shoppers Stop a total of Rs. 250 billion would be required by 2010 in real estate only. The bulk of the investment is in the NCR (Delhi) followed by Mumbai, Bangalore and then by Pune.
Ø Inbound Tourist / Impact of Globalization.
There is a large vast of NRI population in the country. The availability of international goods at comparable prices is also one of the drivers of the industry. Again the impact of globalization has resulted in an increase in both the depth and width of a product, which in turn has resulted in an increase in consumerism.
Ø Unconventional Retailing:
“I shall tell this with a sigh somewhere ages and ages hence: Two roads diverged in a wood, and I - I took the one less traveled by, And that has made all the difference.” Robert Frost
Innovative formats Wedding mall (Gurgaon), Sports mall – Okini (Mumbai), forecourt retailing, E-tailing, Catalog retailing, kiosks, Airport Retailing etc. are some possible formats of future.
Region-specific formats department stores of size 25000-30000 sq.ft. in tier 2 towns as against 50000 + sq.ft. in tier 1 cities to cater to smaller groups.
Ø Urban Opportunity :Indian retailers inspired by Wal-Mart’s growth in small American towns are tempted to follow suit. However, in India the share of 35 towns with a population of 1 mn plus grows faster than their smaller counterparts, from 10.2% today to reach 14.4% by 2025. While the share of the towns in the overall retail market, would grow from 21% to 40% by 2025. Retailers should therefore focus on the top 37 towns in the next decade, as the opportunity in rural India is smaller and fragmented.
Conclusion
The size of India is both an opportunity and a challenge. Bureaucracy and corruption remain key features of business life in India – even if the regional expansion programmes. The race for space is on, with much still to go for! Despite the challenges involved, India remains an exciting and dynamic market, with consumers hungry for choice and modern retail formats. By 2015, KSA Technologies xpects the Indian retail market to have evolved from a small-scale, highly fragmented, provincial operating model to a modern, large-scale cross-regional one.
Ø Inconsiderate Regulatory Framework: A retailer requires around 12 to 15 clearances at the Central, state and local level to set up operations because there is no single window clearance process. The provisions of ‘The Shops and Establishments Act’ also vary. There are various restrictions on interstate movement of goods, especially food grains.
Ø Indian retail industry is greatly fragmented compared to other the developed and developing countries. Only 3% of total Indian retail is organised. Fragmented market results in high inventory levels, high proportion of retail business taking place in the ‘unorganized’ rural areas. India is witnessing oversupply from unorganized formats like kirana & paanwalas. Around 4.3m outlets cater to 1.2bn people, i.e. 280-persons per outlet as against the global average of 1,800-persons per outlet. The Chinese & Vietnamese retail markets too suffered from small-scale, fragmented, provincial operating models.
Ø Most Indian retailers are still uncertain about benefits of technology. Retail IT budget in India is currently 1% of total spends which is lower than US spends. Significant IT investments are needed in merchandise planning, distribution management and POS to capture & analyse customer data . While Indian retailers are still to adopt bar coding, Wal-Mart and Metro are experimenting with Radio Frequency Identification technology. There is high dependency on few consultants & vendors are not IT-savvy.
Ø Limited FDI is depriving India of the resultant consolidation in the sector because foreign retailers provide employment, spend more on marketing, advertising, bulk purchases; have wealth of retail experience from developed retail markets, introduce larger product variety & improved shopping experience. This will also aggregate demand, bypass the existing intermediary system, invest in the supply chain, ensure lower prices to end-customers and higher returns to farmers.
Ø India is diversified, ethnically and culturally, posing a challenge for Indian players wishing to set up a national chain or brand. It leads to product proliferation and stocking larger number of SKU’s at stores, complexity in sourcing & planning, which in turn increases management costs. Foreign players wanting to enter India too have to think twice before deciding to step in.
Ø Untapped Rural potential:
"India's greatest need is to take the benefit of retailing to the doorstep of the farmer," ITC chairman YC Deveshwar says.
70% of India lives in villages & consumes over one third of most durable and non-durable products. Retailing in rural India is a different ball game because before targeting a share of their wallet, the Indian rural market requires an income propeller.
In China (2004) too the Ministry of Commerce has realised the rural potential and by 2009 will build a rural retail network .
Ø Availability of skilled personnel
The non-availability of trained personnel especially at the managerial level is one of the key challenges to this sector. The ability to hire and retain quality manpower will be one of the most important success factors for this industry
The Drivers of Growth of the Organized Retailing Sector.
Providing Quality Real Estate:The government is easing land regulations and releasing land for retail. Rs.8 trillions is being invested in real estate in coming 5 years 19. Retailers are foraying into retail property development & mall management. E.g. Rahejas, DLF, Pantaloon, Provogue, etc. Pantaloon Retail’s Rs3.5bn fund- ‘Kshitij’ and foreign fund ‘Horizon’- US $350m, will develop 51 retail properties10. Another booster is entry of foreign players and provision for 100% FDI in real estate for townships for retail with floor space of over 5,00,000 sq. ft .
Foreign Direct Investment (FDI) in India
FDI is a concept wherein a foreign partner invests directly in a company. This investment would be for the purpose of getting a higher dividend or for getting managerial control in the company. Normally a direct investment in a retailer organization gives the foreign investor a controlling interest in the domestic company. The presence of a foreign investor normally is a win -- win situation for both the investor as well as the recipient country.
In addition FDI may also be used to access certain markets or resources. (Example: in areas like extracting raw material, growing crops and even operations in the service industry. Some of the well-known examples where FDI has been used in the service industry would be De Beers in diamond extraction, Pepsi in the Food and Beverages sector of the retail industry and AIG in the insurance industry.
FDI is a very important means of economic growth for any country. The amount of FDI entering into the country is dependant on broadly two factors:
Ø Internal Factors (e.g. government policies)
Ø External factors (e.g. competitive environment).
However some obstacle still remains in the path of attracting FDI to India. (e.g. reliable regular sufficient power, good roads and correspondingly good transport networks). It is estimated that more than 40% of the perishable goods are lost due to non-availability of refrigerated vans and bad roads. Additionally the fear is that the presence of FDI would drive out the ‘Mom and Pop’ shops and cause loss of employment as seen in USA.
In spite of these obstacles, a World Bank Study on FDI in India has suggested that opening of FDI in the retail sector in India would be beneficial both in terms of technological inputs, new products and also employment generation on lines similar to the IT sector. The benefit of allowing FDI in India can be seen through the benefits that China has reaped by allowing FDI up to 49% in this sector. In India with the per capita consumption being quite low, it is difficult to imagine the Mom and Pop shops being driven out. Most of these Mom and Pop shops satisfy the “locality” requirements rather than the convenience requirement.
The main drivers of the organized Retailing Sector can be identified as follows:
Ø Rising Income Level
The profile of the Indian customer is continuously changing. This change can be seen the figure given below.
Shift in the profile of the Indian Customer
It is estimated that the consuming class and the climbers are expected to grow from a level of 120.8 million households (in 2001- 02) to a level of 157.2 million households (in 2006-07) thus registering a growth of 5.5% p.a.
The Marketing Whitebook has estimated that out of the total consuming class and the consumer class, almost 56% (~ 46 million) is expected to be concentrated in urban India. The proportion of the consuming class and the climbers in the urban markets are likely to drive the demand significantly especially for lifestyle products.
Ø Young Population with high disposable Income
According to KSA Technologies, India has the lowest median age of 24 for over 1000 million populations when compared with the other populous countries like China, USA and UK. This young population by virtue of its mere size would drive the consumption pattern as this group has the ability and willingness to spend. Fig. 6 & 70 demonstrates this amply.
The changing pattern of households by income
The changing size of the population especially in the age group of 20 – 34 years is very clearly depicted in following figure. This class is the relevant class for the retail industry and is growing very rapidly.
The changing demographics in India.
Ø Availability of Brands and Merchandise
Consumerism and brand proliferation has been another enabler for organized retailing in India. Most of the world’s largest and leading brands are currently available in India. For e.g. Louis Philippe, Van Huesen, L’Oreal, Peppe, Arrow, Tommy Hilfiger etc.
Ø Media Proliferation
The presence of a large number of media and the corresponding exposures has led to the increase in consumer spending especially on apparels.
Ø Availability of Real Estate
Availability of the real estate is one of the biggest drivers of the organized retail sector. According to M/s Shoppers Stop a total of Rs. 250 billion would be required by 2010 in real estate only. The bulk of the investment is in the NCR (Delhi) followed by Mumbai, Bangalore and then by Pune.
Ø Inbound Tourist / Impact of Globalization.
There is a large vast of NRI population in the country. The availability of international goods at comparable prices is also one of the drivers of the industry. Again the impact of globalization has resulted in an increase in both the depth and width of a product, which in turn has resulted in an increase in consumerism.
Ø Unconventional Retailing:
“I shall tell this with a sigh somewhere ages and ages hence: Two roads diverged in a wood, and I - I took the one less traveled by, And that has made all the difference.” Robert Frost
Innovative formats Wedding mall (Gurgaon), Sports mall – Okini (Mumbai), forecourt retailing, E-tailing, Catalog retailing, kiosks, Airport Retailing etc. are some possible formats of future.
Region-specific formats department stores of size 25000-30000 sq.ft. in tier 2 towns as against 50000 + sq.ft. in tier 1 cities to cater to smaller groups.
Ø Urban Opportunity :Indian retailers inspired by Wal-Mart’s growth in small American towns are tempted to follow suit. However, in India the share of 35 towns with a population of 1 mn plus grows faster than their smaller counterparts, from 10.2% today to reach 14.4% by 2025. While the share of the towns in the overall retail market, would grow from 21% to 40% by 2025. Retailers should therefore focus on the top 37 towns in the next decade, as the opportunity in rural India is smaller and fragmented.
Conclusion
The size of India is both an opportunity and a challenge. Bureaucracy and corruption remain key features of business life in India – even if the regional expansion programmes. The race for space is on, with much still to go for! Despite the challenges involved, India remains an exciting and dynamic market, with consumers hungry for choice and modern retail formats. By 2015, KSA Technologies xpects the Indian retail market to have evolved from a small-scale, highly fragmented, provincial operating model to a modern, large-scale cross-regional one.
Marketing Myth or Reality?
New marketing paradigms – Myth or Reality?
-K.J.Somaiya Institute of Management Studies
For me Holistic Marketing, Relationship Marketing, Network Marketing, and
Diversity Marketing are mere words. What is of use are the CONSUMER and his BEHAVIOUR.
Marketing according top me is a behavioral science; you understand the consumer behavior you don’t need to learn marketing.
A new broom generates more thrash than it cleans but because it cleans the thrash that it creates the user feels satisfied. Marketing research is this new Broom. You get more problems from it and you get their solutions from it, so you feel good.
No harm in it. But no good in it either.
What does an MR agency primarily do? Tell you what the customer wants? But the customer wants what he sees around , what other companies give him. Instead, give the customer products and services he cant think of this is where a marketing managers acid test lies. Understand the consumer psyche and you’ve mastered marketing.
So, what marketers should engage in is more of BRAND RESEARCH rather than MR.
Executives engage in market research when they are seeking to quantify demand for their current products and potential demand for their new products.
These same executives should engage in brand research when they want to learn how their best customers perceive them, why those customers choose them over competing brands, and how to express their brand universally and crisply across all print and electronic media.
If market research is about benchmarking demand in the marketplace, then brand research is about creating differentiation in the mind of the customer. If market research is about identifying new products and services, then brand research is about why customers choose to purchase those new products. Finally, if market research is about determining price elasticity, then brand research is about commanding a premium price.
There are many firms offering market research. This research is typically quantitative, employing telephone, email and mail surveys. Sometimes this research is bundled with advertising services. Sometimes it is conducted by an online marketing agency leveraging the traffic coming to your website. Most often, market research is provided by companies that specialize in quantitative research and have expertise in specific industries.
Firms offering brand research specialize in building, strengthening and extending brands. They are subject matter experts. Brand research is qualitative, employing one-on-one interviews with your most desirable customers and, when and where appropriate, using focus groups.
The discussion on Brand research over Marketing research is made to conclude that Brand research is a behavioural science and Marketing is a behavioural science.
What You Should Learn by Conducting Brand ResearchIf any research is to have value, it must provide new knowledge and be actionable. So it is with brand research. Below are five critical success questions that brand research informs.
Why do customers choose you over other brands?Knowing this enables you to focus on the skills that help you make and keep your promise to the customer.
Are you competing in the right category?To be clear, an example of a category is laptop computers. A brand in that category is Dell. Knowing in which category you compete in the mind of your most profitable customer enables you to strengthen your position in that category. You can strengthen that position by better delivering the benefits your customer receives when they choose you.
What new products and services can you offer?Old Coke will not travel to new coke. Yet Virgin can travel from the entertainment industry to the travel industry to the soft drink industry. Brand research will identify the current state of your brand in the minds of your customers and what specific steps are required to move your brand to the desired future state.
What are the sources of trust employed by a customer when choosing a company like yours?When making a buying decision, customers seek out trusted sources, such as colleagues, experts, the Internet or advertising. Brand research can identify those sources and the ways in which your customer prefers to interact with these sources.
What are the key messages that resonate with your most profitable customers?Brand research will provide the specific messages that influence customers. These messages should create differentiation and describe the benefits of ownership.
Enough argument to support the proposition of MR Being a NEW BROOM and Marketing being a Behavioural science.
The question is what , if not MR?
I have 2 options
1. MMA
It has 2 components
-- Characterization of brands
-- Branded film making.
2. Cistomerization ( city- customerization)– Before studying the customer study his city.
MMA :
Let us look first at a few hugely successful brands and how they have grown -- the story that many brand practitioners are weaned on is that Procter & Gamble was built on consumer pull and Levers on trade push. This is unfair to both brands because it implies that Levers has not grown on consumer pull and that P&G lacks trade muscle. The important point is that brand pull and trade push both translate into strong brand building weapons as both translate into loyal consumers in their own right.
However consumers need to be induced to come to buy the goods just respect for the brand is not enough. Thus marketers need to focus on UBP(universal buying proposition) rather than USP(unique selling proposition ). So, tell the consumer why he should buy your brand giving him not One but Two UBP’s.
Relying on brand strength remains the best way out of feral catfights over market share. But the efficacy of this style differs with each geographical area. In the future we will see a more brand-sensitive clientele for all goods and services as customers become subconsciously 'irritated' by the deluge of advertising of new brands that confronts them. For them going back to the brands they trust comes naturally.
Characterization of brands
MMA , as I have thought of it would involve planning ones marketing strategies after analyzing a lot of movies, that have worked in a certain area. With specific reference to Retail , I would include a range of underwear’s (Jockey etc..) in my showroom if a film like “Salaam Namaste” has been successful in my area.
Local trends and responses to films should be studied.
If a company wants to introduce a product in an area, why test market and waste your money, why hire MR, why indulge in promotions if you can have a 70% result by “learning from others failures” i.e. someone else has invested in the movie, his money is at stake, you just need to associate the attributes of your product to the aspects of the Film !
If a Film is being accepted by a small town or a semi-urban area , your product will also be accepted.
A 2004 Mediaedge global survey found the following percentages for people who said they would be attracted to a placed product: Mexico (53%), Singapore (49%), India (35%) and Hong Kong (33%). Meanwhile the US logged a lower rating at 26 percent. None of these figures compare with the Netherlands at nine percent and France's paltry eight percent, suggesting that placing for these audiences probably isn't worth the effort.
2004 also had quite a few visible brand associations outside of the film. These were largely print and TV-led associations and were not part of the film script. Namely Mujhse Shadi Karoge with Britannia 50/50; Kyon Ho Gaya Na with Close Up; Hum Tum with Tata Indicom, Hulchul with 50/50, Lakshya and Airtel, Plan with 8 pm whisky, to name a few.
From India to Indiana, going to and seeing and knowing about movies has become so woven into the social fabric that to not participate is to risk being culturally out of touch.
Bollywood is the choice for MMA over regional films and television because bollywood represents the popular belief in the society specially among the youth and offers a broader spectrum. Also, television has a handicap that consumer behavior cannot be studied on geographical basis.
Film is also able to reach out and touch a global audience in a way that TV programming is just too provincial to accomplish. “Dil chahata Hai ” was a national phenomenon with screaming fans lining up multiple times. It’s a connection that TV shows like “ Pyar Vyar & All That (MTV)”though broadcast in many nations, just cannot trigger.
There are risks, though. Some filmmakers feel that brand promotions should be subtle since it might not go down well with the audience. This might be difficult, though, considering that Bollywood isn’t really known for subtlety. Besides, the audience have been accepting the far-removed-from-reality stories for ages haven’t they? So they probably will accept Amitabh Bachchan (only an example) holding up a packet of corn flakes during his (filmy) breakfast and declaring ‘Wonderful brand! Use this brand cornflakes only.’ At the moment, though, one sees many TV promos of films endorsing brands and the general response has been favourable. The other risk is that the star might just overshadow the brand. Fans come to see their favourite stars, not what soap they use.
Thus the point I’d like to make by the discussion above is that there is something in MMA that works well. But it is not in film promotions , rather it is useful analysis of its similarities with ones brand.
Make films on brands
Rather than placing products in films like coca-cola in Taal , or ICICI in Baghban , I propose Indian companies to make films on brands.
The 1985 film “The Coca-Cola kid” is one example wherein a young boy tries to get a coca-cola agency through out the film.
Cistomerization ( city- customerization):
Another aspect of MMA is Cistomerization i.e City- Customerization . it is true that a distance of 100 Kms in INDIA can change customer preferences completely, so when you plan to introduce a product in India do it city wise ( test marketing in 1 city can ensure nationwide acceptance). Select a city , study its culture , its people , and give them your offering repackaged , so as not to alter their way of thinking ( customerize , but on a city basis).
This concept brings back the “ PROSUMER” (Producer and consumer ). The Indian prosumer wants to be associated with whatever he buys . involve him and take his views. This gives him a sense of responsibility towards the product. A product well made involving the consumer creates what some experts call “Excusumption” and not mere “consumption” . Excumption is the process whereby the consumer justifies his purchase by generating certain “excuses”.
Impulse buying ( triggered by price or window display ) may create some amount of repentance or “Cognitive dissonance” as psychiatrists put it. But, “Ecusumption has lesser chances of the PROSUMER repenting on his actions, as he is the need generator and the need relinquisher.
As a scenario ideally representing “Prosumerism” and “Cistomerization” , a big retailer would stock cloth as per the tastes of the consumers of a city and would involve the consumer in selection of combinations, designers and tailors of the Retailor would present designer clothes to the customer within – 10-15 mins.
Companies should cater to what is being dubbed as MASS CLASS: the hundreds of millions of global consumers who are now unified in their quest for the best deals on offer on a global scale in virtually each B2C category.
the more access consumers have to quality, MASS CLASS goods and services ,the more they want exclusivity and status of a different order. The kind that visibly sets you apart from the masses and gives you access to privileges most others won't get.
The future lye’s in catering to this MASS CLASS.
Improve your strategy formulation by using the methods mentioned above for rest of the time “MARKET” your product. To sum this up Steven Heyer from Scott Donaton’s recent book on product placement, Madison & Vine says: “There is the emergence of an experience-based economy, where cultural production is more important than physical production.”
-K.J.Somaiya Institute of Management Studies
For me Holistic Marketing, Relationship Marketing, Network Marketing, and
Diversity Marketing are mere words. What is of use are the CONSUMER and his BEHAVIOUR.
Marketing according top me is a behavioral science; you understand the consumer behavior you don’t need to learn marketing.
A new broom generates more thrash than it cleans but because it cleans the thrash that it creates the user feels satisfied. Marketing research is this new Broom. You get more problems from it and you get their solutions from it, so you feel good.
No harm in it. But no good in it either.
What does an MR agency primarily do? Tell you what the customer wants? But the customer wants what he sees around , what other companies give him. Instead, give the customer products and services he cant think of this is where a marketing managers acid test lies. Understand the consumer psyche and you’ve mastered marketing.
So, what marketers should engage in is more of BRAND RESEARCH rather than MR.
Executives engage in market research when they are seeking to quantify demand for their current products and potential demand for their new products.
These same executives should engage in brand research when they want to learn how their best customers perceive them, why those customers choose them over competing brands, and how to express their brand universally and crisply across all print and electronic media.
If market research is about benchmarking demand in the marketplace, then brand research is about creating differentiation in the mind of the customer. If market research is about identifying new products and services, then brand research is about why customers choose to purchase those new products. Finally, if market research is about determining price elasticity, then brand research is about commanding a premium price.
There are many firms offering market research. This research is typically quantitative, employing telephone, email and mail surveys. Sometimes this research is bundled with advertising services. Sometimes it is conducted by an online marketing agency leveraging the traffic coming to your website. Most often, market research is provided by companies that specialize in quantitative research and have expertise in specific industries.
Firms offering brand research specialize in building, strengthening and extending brands. They are subject matter experts. Brand research is qualitative, employing one-on-one interviews with your most desirable customers and, when and where appropriate, using focus groups.
The discussion on Brand research over Marketing research is made to conclude that Brand research is a behavioural science and Marketing is a behavioural science.
What You Should Learn by Conducting Brand ResearchIf any research is to have value, it must provide new knowledge and be actionable. So it is with brand research. Below are five critical success questions that brand research informs.
Why do customers choose you over other brands?Knowing this enables you to focus on the skills that help you make and keep your promise to the customer.
Are you competing in the right category?To be clear, an example of a category is laptop computers. A brand in that category is Dell. Knowing in which category you compete in the mind of your most profitable customer enables you to strengthen your position in that category. You can strengthen that position by better delivering the benefits your customer receives when they choose you.
What new products and services can you offer?Old Coke will not travel to new coke. Yet Virgin can travel from the entertainment industry to the travel industry to the soft drink industry. Brand research will identify the current state of your brand in the minds of your customers and what specific steps are required to move your brand to the desired future state.
What are the sources of trust employed by a customer when choosing a company like yours?When making a buying decision, customers seek out trusted sources, such as colleagues, experts, the Internet or advertising. Brand research can identify those sources and the ways in which your customer prefers to interact with these sources.
What are the key messages that resonate with your most profitable customers?Brand research will provide the specific messages that influence customers. These messages should create differentiation and describe the benefits of ownership.
Enough argument to support the proposition of MR Being a NEW BROOM and Marketing being a Behavioural science.
The question is what , if not MR?
I have 2 options
1. MMA
It has 2 components
-- Characterization of brands
-- Branded film making.
2. Cistomerization ( city- customerization)– Before studying the customer study his city.
MMA :
Let us look first at a few hugely successful brands and how they have grown -- the story that many brand practitioners are weaned on is that Procter & Gamble was built on consumer pull and Levers on trade push. This is unfair to both brands because it implies that Levers has not grown on consumer pull and that P&G lacks trade muscle. The important point is that brand pull and trade push both translate into strong brand building weapons as both translate into loyal consumers in their own right.
However consumers need to be induced to come to buy the goods just respect for the brand is not enough. Thus marketers need to focus on UBP(universal buying proposition) rather than USP(unique selling proposition ). So, tell the consumer why he should buy your brand giving him not One but Two UBP’s.
Relying on brand strength remains the best way out of feral catfights over market share. But the efficacy of this style differs with each geographical area. In the future we will see a more brand-sensitive clientele for all goods and services as customers become subconsciously 'irritated' by the deluge of advertising of new brands that confronts them. For them going back to the brands they trust comes naturally.
Characterization of brands
MMA , as I have thought of it would involve planning ones marketing strategies after analyzing a lot of movies, that have worked in a certain area. With specific reference to Retail , I would include a range of underwear’s (Jockey etc..) in my showroom if a film like “Salaam Namaste” has been successful in my area.
Local trends and responses to films should be studied.
If a company wants to introduce a product in an area, why test market and waste your money, why hire MR, why indulge in promotions if you can have a 70% result by “learning from others failures” i.e. someone else has invested in the movie, his money is at stake, you just need to associate the attributes of your product to the aspects of the Film !
If a Film is being accepted by a small town or a semi-urban area , your product will also be accepted.
A 2004 Mediaedge global survey found the following percentages for people who said they would be attracted to a placed product: Mexico (53%), Singapore (49%), India (35%) and Hong Kong (33%). Meanwhile the US logged a lower rating at 26 percent. None of these figures compare with the Netherlands at nine percent and France's paltry eight percent, suggesting that placing for these audiences probably isn't worth the effort.
2004 also had quite a few visible brand associations outside of the film. These were largely print and TV-led associations and were not part of the film script. Namely Mujhse Shadi Karoge with Britannia 50/50; Kyon Ho Gaya Na with Close Up; Hum Tum with Tata Indicom, Hulchul with 50/50, Lakshya and Airtel, Plan with 8 pm whisky, to name a few.
From India to Indiana, going to and seeing and knowing about movies has become so woven into the social fabric that to not participate is to risk being culturally out of touch.
Bollywood is the choice for MMA over regional films and television because bollywood represents the popular belief in the society specially among the youth and offers a broader spectrum. Also, television has a handicap that consumer behavior cannot be studied on geographical basis.
Film is also able to reach out and touch a global audience in a way that TV programming is just too provincial to accomplish. “Dil chahata Hai ” was a national phenomenon with screaming fans lining up multiple times. It’s a connection that TV shows like “ Pyar Vyar & All That (MTV)”though broadcast in many nations, just cannot trigger.
There are risks, though. Some filmmakers feel that brand promotions should be subtle since it might not go down well with the audience. This might be difficult, though, considering that Bollywood isn’t really known for subtlety. Besides, the audience have been accepting the far-removed-from-reality stories for ages haven’t they? So they probably will accept Amitabh Bachchan (only an example) holding up a packet of corn flakes during his (filmy) breakfast and declaring ‘Wonderful brand! Use this brand cornflakes only.’ At the moment, though, one sees many TV promos of films endorsing brands and the general response has been favourable. The other risk is that the star might just overshadow the brand. Fans come to see their favourite stars, not what soap they use.
Thus the point I’d like to make by the discussion above is that there is something in MMA that works well. But it is not in film promotions , rather it is useful analysis of its similarities with ones brand.
Make films on brands
Rather than placing products in films like coca-cola in Taal , or ICICI in Baghban , I propose Indian companies to make films on brands.
The 1985 film “The Coca-Cola kid” is one example wherein a young boy tries to get a coca-cola agency through out the film.
Cistomerization ( city- customerization):
Another aspect of MMA is Cistomerization i.e City- Customerization . it is true that a distance of 100 Kms in INDIA can change customer preferences completely, so when you plan to introduce a product in India do it city wise ( test marketing in 1 city can ensure nationwide acceptance). Select a city , study its culture , its people , and give them your offering repackaged , so as not to alter their way of thinking ( customerize , but on a city basis).
This concept brings back the “ PROSUMER” (Producer and consumer ). The Indian prosumer wants to be associated with whatever he buys . involve him and take his views. This gives him a sense of responsibility towards the product. A product well made involving the consumer creates what some experts call “Excusumption” and not mere “consumption” . Excumption is the process whereby the consumer justifies his purchase by generating certain “excuses”.
Impulse buying ( triggered by price or window display ) may create some amount of repentance or “Cognitive dissonance” as psychiatrists put it. But, “Ecusumption has lesser chances of the PROSUMER repenting on his actions, as he is the need generator and the need relinquisher.
As a scenario ideally representing “Prosumerism” and “Cistomerization” , a big retailer would stock cloth as per the tastes of the consumers of a city and would involve the consumer in selection of combinations, designers and tailors of the Retailor would present designer clothes to the customer within – 10-15 mins.
Companies should cater to what is being dubbed as MASS CLASS: the hundreds of millions of global consumers who are now unified in their quest for the best deals on offer on a global scale in virtually each B2C category.
the more access consumers have to quality, MASS CLASS goods and services ,the more they want exclusivity and status of a different order. The kind that visibly sets you apart from the masses and gives you access to privileges most others won't get.
The future lye’s in catering to this MASS CLASS.
Improve your strategy formulation by using the methods mentioned above for rest of the time “MARKET” your product. To sum this up Steven Heyer from Scott Donaton’s recent book on product placement, Madison & Vine says: “There is the emergence of an experience-based economy, where cultural production is more important than physical production.”
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