Retail

Weeks before conducting a full-day seminar –– ‘Reshaping Strategy In An Uncertain World’ –– as part of an IIMC Alumni Association’s GuruSpeak initiative at ITC Sonar on February 1, Venkatesh Shankar, recognised as one of the top 10 experts in innovation management, engaged in an email chat with t2.

Is it still possible to have the same product for diverse markets, for diverse cultural groups? Does standardisation still work?

The standardisation versus adaptation (or customisation) decision is more of a continuum than being discrete. The question is more of how much to adapt and in which dimension. The issue is relevant for decisions not just on the product but on the entire marketing mix. That is, even if the product is the same in multiple countries, the rest of the marketing mix (example: pricing, promotions, channels) could be different.

Standardisation works for certain products such as iPhone and Coke for which the mass preference is the same/similar worldwide. However, a majority of products are adapted to different countries due to differences in customer demographics, culture, stage in economic development, technological environment, etc.

Companies are increasingly adapting products in international markets to gain distinctive advantage over rivals in local markets. Even McDonald’s menu, which used to boast of standardised offerings in many countries are more adapted than before (example: Aloo Tikki in India, Salmon Burger in Norway, Teriyaki Burger in Japan). For B2B products, the adaptation is even more.

One of the drawbacks of retail marketing in India is the lack of knowledge among those on the floor of big shopping chains. How much of a hindrance is this?

Absolutely. The Indian retail market is huge ($550 billion) and growing (up to $750 billion in a few years). Only a fraction of it (seven per cent) is modern/organised retail. This proportion is expected to hit 20 per cent in 2020. There is a huge shortage of skilled personnel. There is tremendous need for education and training at all levels, right from top management to the person on the shop floor and in the warehouse. Because retailers alone cannot fund the training, manufacturers need to sponsor retail academies and training programmes in a big way. Sales training is key. For example, Coke has partnered with ISB to develop mid to senior managers in retailing. But India needs retail training and development on a massive scale.

We often stumble upon reports about online retailing in India being on the rise. What is the actual impact online retailing has had on the retail sector?

In India, if you look at online retail revenues as a percentage of overall retail revenues, it is a small fraction. That’s mainly because retailing is still largely unorganised; it has been traditionally dominated by kirana stores (14 million outlets! By comparison, the US has less than one million stores), and broadband penetration is still very small (1.1 per cent for fixed broadband; 4.9 per cent for mobile broadband).

However, the trajectory for online retailing is key to the future. Two important leading indicators are demographics and mobile penetration. Nearly half of India’s population is under 25 years old and digitally savvy and mobile device penetration is widespread even in villages. Further, online retailing bypasses the need to develop physical storefronts that are still underdeveloped and for which real estate costs are prohibitive in prime neighbourhoods. Therefore, there is strong optimism for the rapid adoption and growth in online retailing.

A shop’s display window makes an impression on consumers. How will new technologies change the way first impressions develop?

Research in shopper marketing shows that globally consumers who have access to the Internet are increasingly searching online and doing “screen” shopping before window-shopping on the physical store. With razor-sharp images and retina displays in most mobile devices and the use of virtual reality, the look and feel of products on screens are constantly improving. Therefore, shoppers’ first impressions may not be shaped by the physical store window. However, physical store window still plays important roles: attracting passers-by, reminding potential customers, inviting prospects to try, providing after-sales touch, and facilitating product returns. In the long run, both online screens and store windows will complement each other.

How should entrepreneurs perceive technology –– a way to cut cost or boost efficiency and consumer base?

Technology serves both roles — to improve operational efficiency (cost reduction is one way) and to enhance and better satisfy demand. It depends on the business idea and model that the entrepreneur is working on. For example, for an e-commerce/ online retail entrepreneur, the Internet opens up the world, offering wide reach to large audiences. Other technologies enable the entrepreneur to offer distinctive service and experience to his/her customers. For an entrepreneur with a supply chain model/ software/ system, technology is a major tool to improve the efficiency in its value chain and those of its clients.

What technologies should India adopt immediately to take the retail experience to a new level?

India lags behind many developing countries in widespread adoption of certain basic retail technologies. These should be adopted first. For example, not all stores use point-of-sale systems that are not difficult to install and use in today’s environment. As another example, scanners should be used by all stores to track and manage inventory. In addition, Indian retailers could leverage the deep penetration of mobile devices by messaging customers and prospects about product availability, promotions and service visits. Because India boasts of many information technology experts, data analytics technologies could be used to improve customer acquisition, retention, and inventory management.

Roughly 15-20 per cent of urban India is using smartphones and most of these users are men. What is the future of mobile phone retailing in India?

The day is not far off when almost every household in the developed world has a smartphone. Most new phones sold today are smartphones. In a developing country like India, widespread adoption of smartphones depends on affordable pricing. The costs of production are falling and price points will reach a sufficiently low level to achieve scale economies in India. Today, one can get a smartphone for Rs 5,000-6,000. Also, the penetration in Indian big metros today is about 23 per cent, still lower than another emerging market giant, Brazil (33 per cent). But India is the third-fastest growing smartphone market. Once smartphones expand in usage, they will empower shoppers.

Two key obstacles in India are: payment systems and fulfilment (transportation and delivery). Most online transactions involving product delivery are cash-based because of the low availability and willingness to use of credit cards (a substantial chunk of Indian economy is underground!) and infrastructural bottlenecks impede fulfilment. However, India can take heart from Russia, where about 75 per cent of online transactions are cash deliveries, but the soaring online demand is slowly leading to transformation of infrastructure there.

Although the mobile device universe is skewed towards men, it is unfortunate that smartphone usage is low among women in India. This may also be related to the role of women in the society. Socially, a lot needs to be done for uplifting the standards for women, including infanticide prevention, improvement of literacy rates and education, and provision of strong security and equal status.

Bitcoin or digital currency is in the news. Do you think it has a future in India?

Bitcoin has been in the news for both the right and wrong reasons. It is relevant to India from the perspective of method of payment. However, to bring the bottom of the pyramid consumers into the mainstream market and raise their standard of living, India needs simpler mechanisms, like micropayments and microfinance vehicles.

Finally, IIT Kharagpur, IIM Calcutta, Kellogg Graduate School of Management… what do you consider to be the turning point in your career?

I am optimistic that my biggest turning point is yet to come. Every institution has been a great learning place. Thus far, however, I would have to say that my key turning point was my IIMC experience since it provided the spark to my career in business management and it was where my intellectual curiosity was kindled the most to sow the seeds for an academic career.

Although I have had wonderful experiences in the academic and practitioner worlds, I feel like my journey has just begun. There is so much to learn and contribute. Over the next several years, I hope to make a difference in the world through contributions to knowledge creation, dissemination, intellectual leadership, institution building, and social entrepreneurship.

What: Reshaping Strategy In An Uncertain World, a full-day GuruSpeak seminar conducted by Dr Venkatesh Shankar
When: February 1
Where: ITC Sonar Calcutta

Dr Venkatesh Shankar Age: 49

B.Tech (IIT, Kharagpur, 1984); MBA (IIM Calcutta, 1986); Ph.D. (Kellogg School of Management, 1995)

Professor of Marketing and Coleman Chair in Marketing and Director of Research at the Center for Retailing Studies, Mays Business School, Texas A&M University

Areas of specialisation include digital business, competitive strategy, international marketing, innovation, new product management, pricing, retailing, branding and mobile marketing

Achievements include Retailing Lifetime Achievement Award (2013-14), Vijay Mahajan Award for Lifetime Contributions to Marketing Strategy Research (2012) and Robert Clarke Award for Outstanding Direct and Interactive Marketing Educator (2006)