Pricing
Another value proposition is lower pricing. While this is
generally not observed today, eventually economies of scale and efficiencies in
distribution (through improved supply chain practices) will kick in. Walmart
alone has been credited to keep US inflation levels lower by up to 15%. A model
of that sort is not just good, but a necessity for India. Whether the customer
interface is unorganized or organized, the back-end has to be organized. Of
course, there are political and social factors to be considered, but an
efficient supply chain should be the highest priority for the government in
tapping the power of organized retail. It will be more of a human supply chain
than automated western supply chains, since the labor equation works
differently in India. But it needs to be more efficient nevertheless.
Competition will ensure that the savings are passed on to the consumer.
Outdated taxation laws, poor infrastructure and exploitation of farmers are all
issues that can be solved with strong government will. Lower prices and
consequently higher purchasing power is the single most important benefit that
organized retail will bring to the Indian consumer.
Customer Service
The third value proposition that can be offered is customer
service. This is where the unorganized retailers are giving the big players a
run for their money. With their lower overheads and flexible operations,
kiranas are able to offer informal credit, home delivery and personalized
service in a more effective manner than any organized player today. This will
remain the differentiating factor for the small retailer for some time to come.
Organized retailers should learn from their smaller brethren and adapt
practices that can help improve their woefully inadequate customer service
practices today. An even better approach would be to focus on the complete
customer experience. For a large format retailer, that could mean adding
value-added services like banking, basic healthcare, personal grooming, etc for
their customers. For a specialty retailer, it might mean consultation services,
installation, flexible return policies and other value-added services. Remember
that a customer is not just buying products from you, but is fulfilling a need.
Whether it is product variety, lower prices or customer
experience, it has to start with understanding what your customer perceives as
value. Perception of value differs across different product categories and
depends on what is already out there, namely the kirana offering. Organized
retailers that understand this and adopt a customer-centric approach will be
successful. The others can keep blaming the value-conscious consumer for their
woes.
About the Author
The author is MD, All India Retail,
Knowledge Partner to the Indian retail industry; www.allindiaretail.com
