Tuesday, September 14, 2010

Success Sutras for Retail 2.0

The monsoon showers will hopefully help wash the red off retailers’ balance sheets! It’s time to cheer. Cheer that EOSS for most retailers has gone well; and for those that pretended to be giving away a lot but meanly held back; their customers just showed them who is smart. It’s time to ship all their unsold merchandise back to their warehouses. Make way for Autumn Winter ’10.

Retail has come a full circle; hasn’t it? I mean, look at what happened in the last three or four years – Retail catches the imagination of large corporations; they hire some big names in consulting who tell them that retail will grow at 35% -40% annually and create some two million jobs. Some large business houses go all out and devote a few thousand crores; they assemble armies of people who could barely spell ‘retail’. Blue prints are drawn; executives from different industries are poached with the lure of obscene salaries. Having put their money; retailers go berserk in signing up real estate. Developers and landowners lord over their fiefdoms; extort insane rents and go put all that money in stocks. Retailers fill their stores with container loads of ‘made in china’ and recruit thousands of warm bodies to populate their mushrooming stores….and both, retailers and their employees, all wait in feverish anticipation of that elusive customer! The going is good for a while and then suddenly, our banker friends across the Atlantic belatedly realize that they have been financing non-existent assets and suddenly all their balance sheets are soaked in blood. Every street from Wall street to Dalal street is in the red! Credit dries up; Banks refuse to lend, let alone restructure the mess. Some retailers become history. Curtains close on Retail 1.0.

Welcome to Chapter 2; to all those lucky ones that survived the cloudburst and some that barely made it by the skins of their teeth! You deserve a place in this world. It’s time to pitch your tents; hoist your flags and blow the battle horns once again.

Now that the curtains are up again, is there something that we need to do differently that will certainly spell success in retail? Yes, there is.

Sutra # 1: It is important for retailers to establish ground rules for every single activity or process that is critical to their business. Beginning with getting the merchandise mix right to sourcing and buying the right products. Having ground rules here means to resist the temptation of creating standard ‘one-size-fits-all’ merchandise mix across stores. A sharp focus on localization is inevitable. Moving on into store operations; retailers will do well to establish store policies related to receiving goods; VM; replenishment; exchanges and returns. Who does what, why, where, when and how? It is equally crucial to keep these policies both customer and employee friendly as possible. In trying to please the customer, retailers often err on the side of over-complicating policies making them almost impossible to practice. When policies exist in writing and are communicated widely; there is no scope for individual interpretations and attendant inconsistencies. Any retailer desirous of giving their customers a consistent experience across its chain of stores has to invest time and resources to getting the first sutra right. Put it in black and white, because you don’t want to see any grey!

The second sutra is the most critical of the three. In fact it has two parts to it. 1) To indentify; hire and recruit the right people at all levels. It is common thinking in retail that regardless of how unsuitable or untrained the rest of the sales staff is, it is important for the store manager to be ‘seasoned’. ‘Seasoned’ frequently translates into someone who’s been doing things (not necessarily in the right way) for a long time. Therefore, an ideal store manager candidate typically is someone who’s been on the sales floor for long as a senior supervisor or department manager. Remember; practice does not necessarily make a man perfect; it makes the ‘practice’ more ‘permanent’! So, if your manager is someone who’s been doing things a certain way – his/her way in most cases - because he/she has not been educated on how to do something, then that’s the only way you will get it. So, teach your store manager what is important for your business and how to monitor it. 2) A fact that cannot be over-emphasized is the need for the store staff to be adequately and periodically trained. My organization has studied patterns in individual and store performance over the last 30 years and we’ve been able to conclude with certainty that trained staff are consistent in converting ‘shoppers’ into ‘buyers’. They are confident about their product knowledge and their abilities to communicate benefits to suit customer needs and are often found selling higher priced products in any given category, over their untrained counterparts. Trained staff also add-on successfully in at least 60% of selling opportunities and the added product is often of significant value that takes the average basket size up by 15% to 20%. I’ve heard some retailers site attrition to be the reason for not training their staff or making a perfunctory ritual of any little training that they undertake. I have just one thing to say to them. Every garment we wear gets wrinkled by the end of a few hours and that is no excuse to wear wrinkled clothes! Untrained staff have been found to lose more selling opportunities that would otherwise have been converted to sales. Often the opportunity lost is bigger than the investment required to train them. Panic not. Help is at hand!

The third sutra for success is to instill a sense of commitment in every customer service associate that their roles as sales persons is two-fold; a)to help every customer buy (buy more and more often) and b)to consistently sell, thereby moving the store inch-by-inch towards its goals. Any salesperson who has difficulty accepting this fact of their lives; is no salesperson! That’s easier said when individual contribution is not being measured on an equitable and fair scale and/or not being rewarded fairly and adequately. This is why it is important for retailers to have an enterprise-wide system that helps set fair and consistent individual goals; track them consistently; reward the right behaviors and coach the inconsistent behaviors towards meeting the desired levels.

For some retailers, it is a question of life and death to have good ‘mystery shopping’ scores that they have outsourced agencies perform periodically. They believe in doing everything possible to get a favorable score. So much so that, they have uniform incentive plans for their store staff, lest disgruntled staff get de-motivated and offer unacceptable customer service. They are also wary of setting individual goals and rightfully rewarding each sales person for his or her contribution; as they suspect that competition to achieve individual goals will cause conflicts between staff. Well, think of it; each time all sales people in a store get rewarded equally; the non-contributors feel encouraged to just piggy back and not make any efforts to contribute; On the flip side; contributors feel frustrated that their efforts rewards laggards while they themselves are not adequately so. Missing the forest for the trees, if you will!

It is strange that while retailers are ready to compete with one another, store for store; they shy away from instilling a spirit of healthy competition among their staff.

In the next three to five year horizon ‘store profitability’ and ‘same store growth’ will be the only two factors that will make a difference between a successful retailer and the one that isn’t. What that means is that the first surest way to go out of business is to open stores just to add to the store count without aiming for breakevens and profits. The second surest way is to be under the fond illusion that one is on the growth path when most of the growth is coming from new stores and not from existing ones. It’s a classic ‘catch 22’ for retailers. They ‘should not’ expand if they are not sure that each of the new stores will themselves be profitable within a reasonable time frame. And yet, while new stores are set in the profitability orbit; they ‘ought not’ take their eyes of exisiting stores to ensure they are sweating the daylights out of competition to consistently grow at or over industry growth rates.

30% or 40% overall growth will mean nothing if each store is not in and of itself profitable and that, stores that have been in existence over one year are showing healthy growth from their last year numbers. That’s all that matters. And the only certain way to ensure this is to devote company time and resources to getting the three sutras of Retail 2.0 right.

Welcome aboard!

Monday, August 2, 2010

The Perfect Sales Pitch


After a four-month break from the gym, it was time for me to regain the lost health. And so, keeping my options open, I went to a fitness centre close to my workplace to see what it could offer me. “Good evening, sir,” said a young and cheerful attendant, Mohit, ushering me into the lobby. “Please have a seat,” he said, sitting opposite me on the sofa. “Can I get you something to drink – tea, coffee or soft drinks?” he enquired. And while my tea arrived, he fetched his notepad and pen. “Have you visited our centre before, sir?” he asked politely. “No, this is my first visit,” I replied. “Then, please allow me to show you around,” he suggested, getting up from his seat and guiding me in the direction of the cardio section.

It was indeed a pleasant and genuine greeting. I kept registering in my mind and couldn’t help relate to what we train retailers in – a good opening line and a quick tour. I found the mannerisms of the attendant impressive and began to feel at home. Perhaps, my long search for a fitness centre had ended.

There were many other factors that could go wrong, and so I chose not to decide so quickly. “We are a UK- based fitness centre, operating over 500 fitness centres in 20 countries. In India, we have four centres – two in Delhi and one each in Bangalore and Mumbai,” he said as we embarked on the quick tour. “We have the best of equipment, sir,” he pointed as we passed the cross-training section, which looked like an assembly of stationary robots with handles and pedals at odd angles.

As I walked past, I couldn’t help but admire a few determined souls who were wrestling with those equipment with their hands pulling bars, their complaining legs pushing pedals, their foreheads filled with beads of sweat and almost all of them panting for breath.

“To our right is the lounge where members can relax,” he said. Some, who had finished their workout for the day, were watching TV or flipping through magazines.

When we reached the cardio section, all I saw was another assembly of equipment – treadmills, cross-trainers, cycles, steppers and other equipment. They were all facing a glass wall at the far end, which gave a rather unsightly view of the road below. Suspended from the ceiling against the glass wall were half-a- dozen 48-inch LCD TVs. After returning from the cardio floor, Mohit took me into the inner recesses of the centre. On the right we passed other equipment. They were all facing a glass wall at the far end, which gave a rather unsightly view of the road below. Suspended from the ceiling against the glass wall were half-a- dozen 48-inch LCD TVs.

After returning from the cardio floor, Mohit took me into the inner recesses of the centre. On the right we passed a small room, whose floor, walls and ceiling resembled that of a dance floor in a discotheque. It had several stationary cycles and an elevated platform at the far end. “This is our RPM studio,” he introduced.

To the left we passed the weights area, which had a sound-proof soft flooring, as against the wooden flooring in the rest of the centre. In front of us was a larger studio. On the stage at the far end was an instructor with a microphone, who was making 20-odd enthusiasts move their bodies to her instructions. “This is where we conduct aerobics, kick-boxing, pilates and yoga sessions, sir,” said Mohit, as I stood admiring their synchronised steps. He then pointed to a wall behind us that had a huge display of the schedule for the month, featuring various sessions at the large studio. Our next few stops included the locker room, sauna and washrooms – all very clean and hygienic.

The fitness centre was indeed well- equipped, a main criterion for making the ‘buying’ decision. But many times, a good product is not enough to make people buy it, understanding the customer’s needs is equally important, if not more.

As we returned to the consulting table, Mohit began to know me and my needs better. “Sir, do you live close by?” he had begun to probe amiably. “No, I work close by,” I replied and added “I’d like to work out after office.” Trying to help me in suggesting the right fitness solution, he made me provide him more information. “You see, I have a long drive back home,” I felt encouraged to say, “and it does not help one bit that I end up very late at the gym near home where I used to work out earlier.”

“As a result, I’ve been very irregular, and I’d like to fix it,” I said, feeling rather guilty about the hiatus from the gym. “I can see that you are very determined to keep yourself fit. That’s very good, sir,” he said, half complimenting and half reassuring me that I was being clever about wanting to choose a gym close to office. All this was only making me more convinced that this could indeed be the right place for me. However, I still didn’t want to jump to any conclusion.

“What is your motive for working out, sir?” he asked. “I’d like to keep myself generally fit and it would also help if my fitness helps me play better golf,” I said. “That’s very interesting. We have some golfers as our members and you would love to work out here,” he said, letting me know that I would be making the right choice if I enrolled at their centre. He was not just reassuring me, but was also preempting my “post-purchase dissonance” if I decided to enroll there.

“Sir, now that I understand your requirements, let me explain how we help people with their fitness needs,” Mohit said, slipping into demonstrating various options. “I’d like to offer you a two-day no- obligation trial that lets you use our club and all the services. You can then decide which membership plan you’d like to enroll into,” he said.

Although it sounded like a bait, it was equivalent to a test-drive and so I accepted it. “What are the different membership plans that you offer?” I asked. And he explained the four, six and 12-month membership plans and how much they were priced. I told him that I felt the joining fee was unnecessary, but the administration charges were understandable. I had begun to raise objections and it was his turn and really his last opportunity to save all the good work he’d done so far by overcoming my objections.

“I’d like you to use our facilities today and decide for yourself, sir,” he repeated and continued to highlight the benefits of their membership that he’d shared with me during the quick tour – unlimited access to using the gym at any time during working hours, renting DVDs, using sauna and the lounge, etc at no additional costs.

And, as if showing me around the fitness centre and highlighting the benefits of the membership weren’t enough, he enticed me with free personal training sessions. “If you enroll today, in addition to all the benefits that I have just mentioned, I can offer you five sessions of personal training for free,” he said, adding, “personal training is a charged service in which we assign you a fitness expert, who assesses your fitness levels and designs a personal training programme to meet your fitness needs.” Now, that was a clincher.

I had been evaluating Mohit for his behavior and salesmanship. He had been very cordial to me from the word go, and had made me feel comfortable. He had taken me on a quick tour of the centre, explaining all the different services and their benefits to me. I was convinced by now that this was meeting my needs and I was seriously considering enrolling the same day, although I had the two-day free trial available. As I got lost mentally weighing the pros and cons and calculating the ‘value’ I was deriving for the ‘price’ I had to pay to access the benefits…Mohit timed his ‘closing the sale’ appropriately. ‘I think this is one of the best deals you will get and I think you should enroll today to avail the offer Sir’ he said, persuading me gently to make the purchase. ‘Why don’t I introduce you to a personal trainer, who will assist you in using our facilities for today and I will wait for your decision after you are done with your workout’ he said with his charming smile.

Mohit indeed had put up an excellent sales presentation by connecting with me more like a consultant who’d help me make the right decision on the choice of a fitness centre. He knew about their services well (product knowledge) and kept continuously probing to uncover my needs and arrive at the right solution for me. He had demonstrated the value both, in his behavior and the physical tour of the centre. He had handled my objections well and I believed he had offered me a good deal, although the price I was willing to pay was quite significant for a six-month membership...of course, I didn’t need too long thereafter to sign on the dotted line.

Monday, June 21, 2010

Listening ain't enough!

I was checking out of a hotel in Delhi recently and as I had a meeting at 4.30pm before my flight at 9 pm, I requested the hotel that I’d like to check-out only an hour before, at 3.30pm as I had no intentions of basking in the Delhi sun! The staff at the front-desk was tentative at first, and then tried to tell me that I’d have to pay extra if I decided to extend my stay by three hours! For God’s sake, I had stayed there for three nights and was happy with the facilities that I’d even requested their sales department to get in touch with my office for a potential corporate tie-up. I wondered if I’d made a mistake!
I objected to their intention to charge me extra as I believed it was not fair. I reasoned that most hotels world-over accommodate a few hours of additional stay, especially when the occupancy rates are low, as it was the case at this hotel and considering my situation, they should not charge me extra. The front-desk staff then tried to educate me that their systems would automatically charge half-day tariffs for all check-outs after 12 noon. Now, that was the stupidest reason they could’ve used to overcome my objection. I then wished to escalate the matter to their manager, who tried repeating the same reason for having to charge me more. While I sat the manager down and explained to him how he should be controlling his computers rather than them controlling his behavior” several questions kept cropping up in my mind to be answered…. “Why do businesses always feel the urge to hide behind policy to justify not acting in the interest of customers?”; “What makes managers insensitive to their customer’s needs”; “Do they in fact empathize with their customers at all?” etc.
Are businesses missing out on something very vital to their very existence – being ‘Customer Centric’?
In another incident, I was convincing the HR head of a popular retailer to make certain investments in training their staff and he said “I don’t want to spend more than a lakh of rupees training my new recruits” “They will be gone in a few months and then I’ll have to spend on the new bunch of guys again…” he reasoned. I was only reminded of what Harry Friedman says “What if you don’t train them and they stay?!
That added a new question to my list. “Are businesses, particularly those in customer facing industries such as retail and hospitality, investing in enabling their staff to act in the interest of their customes?”
For starters, they need to start viewing things from the customer’s perspective; listen to their customers closely and align their product or service offerings in such a way that causes minimum dissonance between what the customer wants and what the business can lawfully yet profitably offer. In short; put the customer in the ‘Centre’. Make their business ‘customer centered’. I found this really simple yet practical definition of ‘Customer centricity’ on the internet. “Being Customer Centric is about an ability for everyone in the company to continuously learn about customers and the market. It is also the responsibility of everyone in the company to respond appropriately to what they learn.”
Therefore, how can retailers be more customer centric?
Retail businesses I’ve known have been slow in adapting a holistic approach to ‘learning about customers’. The least (or the most) some retailers do is to launch a loyalty program. Now, the problem with loyalty programs is that rarely if ever, do they go beyond acquiring and redemption of points for transactions made at the retailer’s stores. At times, customer information is used to invite loyalty card members to special product launches or offer them privileges such as assured parking or assured discounts. Retailers have been assuming that throwing such practical privileges will win them a permanent place in the hearts of their customer’s and absolve them of the ‘crime’ of not serving the customer in ways that matter (having the right product or the right size of merchandise etc. and helping customers make the right choices)
Are businesses listening?
Beyond loyalty programs and CRM, retailers should ask themselves the question – are we listening to our customers? It is good to have customer feedback forms – that has now become a ritual at the end of every shopping experience at a high end store; or a restaurant or an airline. I’m yet to receive a feedback from any of these sources – either thanking me for the feedback or acting upon suggestions I’ve made! If businesses have no intention to act upon what their customers are saying to them, they have no business wasting their customers’ time.
What are the various listening posts? (touch-points)
Apart from the many inanimate ways of knowing about customers – either through information from loyalty cards or from feedback forms – retailers can tap into what their sales associates find out while serving customers. I’m not sure whether retailers have formal mechanisms of capturing what their associates know. I’d believe it will certainly be a wealth of information that can yield competitive advantage when acted upon appropriately – for example; I’m sure I was not the first one who’d objected to being charged extra for a late check-out; had the hotel management been tapping into experiences of the front-desk; they should’ve long done away with such an ‘un-welcome’ policy. Budget permitting, retailers can also invest in Business Intelligence (BI) tools – both manual and digital -to capture and stream information to decision makers within the organization.
Next comes the task of ‘responding appropriately’ to what they learn.
My colleagues and I mystery shop regularly at retail outlets. Many a time, when we encounter a situation when we don’t find the right size or color of a piece of apparel; rarely do we get appropriate responses from staff – seeking to take down our contact details to inform us when they receive shipment etc.,
Excuses such as ‘out of stock’ or ‘size not available’ or ‘price not updated in the system’; ‘goods not dispatched from warehouse’ etc. are common on shopping trips. ‘Out of stock’ or ‘size not available’ could mean that the merchandisers did not anticipate demand for the style or size; or the sourcing and buying department did not release purchase orders well in time for the stocks to reach the stores. ‘Price not updated in the system’ could mean that although the merchandisers and buyers have done their job; the IT or the supply chain guys have not updated the system and hence the product cannot be billed out. ‘Goods not dispatched from warehouse’ could mean that although stock is available at the warehouse; either indents were not made on time or the warehouse has not been able to pick and dispatch the stocks as required.

Therefore,’ responding appropriately’ means, aligning the entire value chain – Sourcing; Buying, Merchandising; Supply Chain; Operations; Finance; Marketing; Information Technology and Human Resources -to meet or exceed customer expectation.

In the case of the hotel’s excuse for having to charge me excess; it is a matter of making changes to the billing software (or to the company values to begin with)
When all these functions are well equipped to meet the business demands; now comes the supreme task of enabling people within the organization to optimize utilization of resources. And ‘enabling’ begins with ‘Training’.

Training is required at all levels of a retail organization – be it a product or a service retailer - to remain consistently ‘Customer Centric’. Training store staff; that represent the brand and reputation of the company is key to superior customer service. Customer Service Associates and all other front-end staff; that comprise more than half of any retail operations team; requires a focused training on selling and customer service skills. Team leaders, floor and store managers - that may not perform active selling but are customer-facing in nature – need to be trained in not just meeting sales targets; but also running store operations smoothly deploying people efficiently. Managers with responsibilities of managing a cluster of stores need to be trained on optimizing resources and building efficient and profitable retail operations.
While ‘customer centricity’ is a key differentiator; it can be brought about by making right investments in enabling the workforce to serve customers with a heart and not merely by a policy!

Monday, May 17, 2010

Go (mystery) Shopping

To the acute jealousy of my friends and colleagues I found myself recently in Las Vegas to attend a ten-day long training program at our Corporate Headquarters. I had trouble getting across the purpose of my visit to my friends and colleagues as they understandably got distracted at the very mention of Vegas! It also did not help one bit that I was supposed to travel with two female colleagues!!
My first visit to the United States - is in itself somewhat an act of eluded destiny - as I had ducked many invitations from family based there for close to two decades now. So much so that I was the sole family member who had not set foot on the US soil so far. Now that I’ve lost that distinction, I set out to do what I’m helplessly addicted to as I extended my trip to visit family. Go (mystery) shopping.
On one such occasion, I found myself at a large home improvement store in San Jose, California, with my sister-in-law as my local guide. After realising it was not a crime to click pictures inside the store, I proudly pulled out my Kodak and set my index finger loose on the trigger. No sooner was I in the ‘Lights and décor” section and had clicked pictures of a few well-lit aisles, did I hear…”Hey, you gotta be doing up your bedroom or living room if you were clicking pictures of our lights…” said an almost celestial voice. I turned around to see a store associate with a bright smile. “There you go”, I thought to myself…”a very good non-business opening line; with all the promise of a continuing conversation”…Now it was my turn to be taken aback and I unwittingly realised that I was getting a taste of my own medicine. “Well, I’m just checking out” I retorted sheepishly. “Guess what, if you are doing up your house, I can have an expert interior designer come over and give you some valuable tips…at no cost” he said; “these guys usually charge $200 an hour” he finished. “Well, I have no definite plans” I asserted. And my sister-in-law was silently enjoying the unfolding drama. As I tried to wriggle out of the unaccustomed level of professional customer service, I was already in the ‘Sanitary ware’ section of the store. “Now”, said this associate having followed us, “here’s something we can do for your bathrooms as well”. “I’m sure you have your home here?” he questioned. And I wasn’t in a mood to reveal that I was just a tourist visiting my brother. “Yeah” I said. “How old is your home?” he asked..and I looked at my sis-in-law, more for help rather than for the answer. And before I could find the legitimacy within me to answer that question, he had spread in front of me a brochure that had pictures of bathroom fixtures and bathtubs. Now, before you get ideas. He was trying to sell me a service at their store that would have bathrooms and bathtubs refurbished without breaking down walls or pulling down tiles. He said, he could check whether there was one of their architects in the vicinity of where I lived to see if he could come over and assess the bathroom of my (brother’s) house (that I was visiting!).
When I knew that I couldn’t continue anymore answering his questions with a straight face, I said “Well, thank you for the information, but I’m not looking at doing up my bathroom just yet..and when I do, I’ll remember you guys have this really fantastic service”. That should have indicated to him that I was just window shopping and he disappeared from the scene…or so I thought! I instantly slipped into mentally pumping my fist with a great sense of achievement, having warded off even the most persuasive salespeople. The associate showed up behind my back in a few moments with the same brochure in his hand. This time, he handed it to me and said “if ever you think of doing up your bathroom, you should call me. Here’s my name and number” he said pointing to the scribble on the brochure. “Thank you Alex. I shall do that” I said pocketing the brochure. Only my sis-in-law seemed very amused!
I’ve always believed Nordstrom was a heaven to customer service. Not surprisingly, I had my brother, this time in Minneapolis, Minnesota; drive me to the world’s biggest mall – the Mall of America. In the Nordstrom store there, I set the awestruck kid in me loose as I visited one section after the other. In the gifts section on level 3, I found drawn into an alcove of interesting gift ideas – made from brass, copper, porcelain etc. The charming associate Peggy, in that section was not only very cordial and warm but was very helpful in her assistance. She answered my questions on what certain products were made of; displaying excellent product knowledge and at times going the extra mile to find me a convincing answer if she didn’t have one ready. Like the unique bag I discovered on one of the counters; that, when folded looked like a ladies handbag, but would open into a nice shopping bag! It was a pastel green colour that did not particularly appeal to me and noticing that it was the only piece left, I asked her if they had any more colour choices. This was one of their impulse buy items and was sitting next to the cash till in that section. “I’m sure I had seen other colours in them and they must be there in other sections. I shall check for you in a minute if you’d kindly wait” she said, disappearing from the scene. As I browsed through the gift section, admiring the products and visual merchandising; she appeared in no time with two other colours – a light grey and a light blue. I was planning to buy one of them for my mother who was shopping with me; but she seemed unexcited about the really cool bag. I instead picked up a set of tomato shaped porcelain ‘salt and pepper’ shakers. And as I checked out my purchase, I couldn’t help impulsively adding a copy of the “Nordstrom Guide to Men’s Style” for an additional $20. I have heard stories of how Nordstrom associates are told to “use their best judgement at all times” while serving customers and I found that being lived upto in front of me.
As I slipped down to Level 1, to immerse myself in the men’s section of the store; I was awestruck at the immaculate and colourful display of men’s apparel. John, the associate in that section - in business casuals worn with a tie and checked brown blazer - was truly warm and friendly. He never tried to sell anything to me. There was no “Can I help you, Sir” either here or in the gifts section above. John appeared genuinely happy to see me in his section and he opened the conversation. I couldn’t help asking him how it felt to be working for one of world’s best retailers and he said it was really very gratifying and cool! And how they all love being part of the brand and mentioned how the Nordstroms themselves come to the sales floor from time to time, to not just mingle with the associates but to even serve customers!
I had no intentions of buying anything here; but like it always happens with me when I’m mystery shopping, I felt tempted to look at the light blue dress shirt, that looked well crafted. I had no hesitation at the $49.50 price tag as I was truly happy being there and being treated well. When I asked John what size I should pick up; he immediately pulled out a measuring tape from his pocket and, with my permission, had the circumference around my neck measured. “15 ½ would be good for you” he said and I suggested that I’d rather pick up a 15 ¾ just in case I decided to wear it with a tie. John liked my reasoning and happily packed a 15 ¾ for me. I continued to stray into the men’s footwear section, before I finally decided to join the rest of my family who were kind enough to wait for me in a restaurant on level 3.
Be it Alex, Peggy or John or any other retail store associate; Steve or any other cab driver or airline staff; I experienced a minimum credible level of “customer service” across the United States, that is so intangible to explain; but not too difficult to define and execute; as we, in India help most of our clients define theirs.

Tuesday, April 20, 2010

Hire the attitude; hone the skill

In ‘The True Differentiator’ last month, I spoke of the three ingredients for success in retail – a) sales people with the right attitude to serve and an aptitude to learn; b)a time-tested training curriculum that is enabling and empowering in its philosophy and c)choosing trainers that can empathise with the trainees and make training impactful and fun.

A willing workforce

“Hire the attitude and train the skill” is a popular statement. You can never train your salespeople to have an attitude to serve your customers. However, you can train them how to take care of your customers when they are in your stores. Attitude comes from ‘willingness’ – willingness to a) consistently respect and adhere to company or store policies and procedures and b) do whatever it takes to help customers make the right choices of products and services they believe will address their needs and wants. Store operations become complicated and chaotic – as they are in some retail environments – primarily because retailers unwittingly hire unwilling salespeople.

I admit that attitude is intangible and is therefore difficult to assess. There are assessment tools to understand behavioural patterns of potential salespeople. But, if all that sounds very sophisticated and/or expensive and cumbersome to follow; store managers and retail HR personnel – through training - can be equipped with some tips and techniques to make such assessments during the interviewing and hiring process.

Determining salespeople’s attitude upfront – during the hiring process or at the earliest thereafter - also helps retailers in a) fitting people in roles that act as motivators and b) defining career paths for salespeople to aspire for and reach through consistent acceptable performance.

Not everyone is made for retail. While the glamour and glitz attracts many salespeople; for some it is another job that gets them their salaries at the end of the month. Retailers have the onus of choosing the right people – those with a passion to ‘sell’ and an aptitude to ‘serve’. One without the other is unhealthy. Those with only a passion to ‘sell’ tend to be pushy and can alienate customers faster than you spend to acquire them! While those with only an aptitude to ‘serve’ will only help you make an excuse of service what you fail to do through selling.

A robust curriculum

Have you ever liked a movie without a script - without a story to tell? It is not enough just populating your stores with people with a heartbeat and cladding them in uniforms who may or may not come to work everyday. It is important to have a screenplay (scientific training) with a script (selling skills) to enact. You need a script that sells – quite literally! Retail training programs have to be authentic and train salespeople in handling the different moments of truth on the sales-floor.

Training programs have to accomplish two crucial imperatives – a) train salespeople to become compliant with store policies and procedures and b) say and do the right things when they come in contact with customers. The most effective retail training programs are those that first help articulate store standards; develop the right scripts for various roles on the sales floor and train salespeople using a pedagogy that is known to deliver the desired results – sales increases and satisfied customers.

When you invest in a training program, you deserve only the best in the business – a training curriculum and pedagogy that is proven to be effective - a training program that embodies learning from being applied successfully across different formats and in different markets.

The transformers

You need expert screenplay and script writers (trainers) who know the retail business -retail trainers that understand the dynamics of retail – store operations; sales and customer service.

The true differentiator

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You may be shopping for that sophisticated business suit for your first job or for an ethnic attire for a wedding reception. You land up in a mall hoping that you can choose from a wide variety of brands and stores to make your purchases at. You have beaten the traffic; cursed half a dozen jay-walkers and motorists and have finally pulled into the mall. You park your car and step into the atrium.…and Viola! The glitter and glamour; lights and music; shining floors and sparkling ceilings; those riotous colours from the show windows….and the excited shoppers have all transported you to another world. When you bring yourself back to reality and try to recollect why you are there; you seem to be more confused than you were before you entered the mall. You find yourself on the horns of a dilemma as to which store to patronise for your purchase? Trust me. It’s not your fault. Malls look alike from the inside; you find the same brands in this mall that you found in the previous mall that you visited. Only that, this mall has a BMW parked in the atrium while the previous mall had a Merc – the so called bumper prize! So much so that even the clowns out there to entertain shoppers are also from the same agency!

You went to the mall with a specific requirement – of buying a business suit for your first job and that is a ‘planned purchase’. Planned purchases are usually well thought of and well considered purchase decisions that we make to fulfil specific needs; and they are usually preceded by two layers of decision making. The first layer – what (product) to buy? Eg: a formal business suit and when to buy it? say, before that all important first day at work; where you want to make the best impression. The second layer of decision making however - what (brand) to buy? What store (to buy it from?) and how much to spend? - determine the ‘consideration set’ – a choice of stores that come to your mind unaided; that would fulfil your planned purchase. But, malls being what they are – one indistinguishable from the other; and stores inside of the malls; all looking increasingly similar, you tend to stray into any store that scream out their discounts the loudest.

If you are a retailer; every time a customer chooses to enter your competitor’s store, you are so much farther away from influencing his or her buying decision - even the vantage location (place) where you are located; seems to have little or no impact.

Is it true therefore, that the loudest and brightest advertisements or announcements of discounts always snatch away a customer? Are you, as a retailer completely at the mercy of what may attract (or rather distract) a potential customer from entering your store? Do you also have to spend on full-page colour advertisements or do up your store windows or erect discount posts outside your store to attract customers? Is it then, a battle of the advertising rupee - that takes away any edge you may be able to derive through your smart marketing plans (promotion).

We know it too well that – one retailer can outdo the other in the choice and assortment of merchandise offered (product) and the price at which it is being offered (price). With that, the four pins of McCarthy’s marketing mix lie knocked down on the slippery floors of retailing!

But, for retailers, a potential customer lost is a customer lost forever in these days of shifting loyalties. Therefore, is there something that we have missed here? How can you as a retailer ensure that a potential customer, safely and surely walks past all the tantalizing cacophony out there and step into your store to spend some of his money?

We agree that ‘Retail’ is all about ‘brands’ interacting with their ‘consumers’. And shoppers are people that have emotions and feelings; reacting differently to different stimuli. Their reactions can be made favourable or adverse – they choose to become ‘buyers’ or simply remain ‘shoppers’ depending on the influencers that interface with them during a shopping experience. In-store touch points have a significant influence on our shopping behaviours. While the product, price, lighting and ambience – inanimate as they are - play a limited role as passive influencers of purchase decisions; it is the human ingredient – as animate touch-points hold the highest potential to influence shopping behaviours and they can be ‘trained’ to ‘behave’ in a desired way to bring about favourable responses from customers. This makes our sales people the most pivotal of all interfaces between a ‘shopper’ and a ‘store’ – sales people play the role of true “catalysts” that convert ‘shoppers’ into ‘buyers’ while remaining unaffected themselves.

It is small wonder then that ‘planned purchases’ comprise only 30% of all purchases made. The remaining 70% are influenced on the shop-floor – a good part of them by sales people!

Getting salespeople to be better catalysts should be at the heart of any training program. Training retail salespeople is unlike how a tiger is trained in a circus - jumping through the loop at the lashing of a whip. It is more like Pavlov’s dog - who gets his feed to the accompaniment of a ringing bell – a conditioning that offers a reward for every effort.

Unlike the inanimate factors, ‘sales people’ can be ‘conditioned’. Much as ‘actors’ follow scripts while enacting their assigned roles; to the requirement of the ‘director’; so also sales associates can be trained to put up a ‘show’ every time a customer walks into your store. Having untrained sales people on the shop floor is like having all the characters on stage and having no script to follow! It is essential for retailers to first acknowledge the need to train – provide a screenplay and a script for their respective ‘retail shows’. And, find the right store manager to direct the play - who works with and through his sales team to bring about a cohesive and seamless performance to the liking of his customers, that results in a resounding applause (sales target). When this becomes a habit for a store team; the audiences (customers) will begin to ask for an encore each time (they will have compelling reasons to patronise your store again and again.)

It is for want of training that we see sloppy customer service around us. Retailers will do well to ensure that every training investment has these three right ingredients – 1) trainees with the right attitude to serve and the aptitude to learn (just as ‘casting’ is very important for a movie to get the right people to play the right characters). 2) A time-tested training curriculum that is both, enabling and empowering in its philosophy and approach (as critical as having a screenplay and a script) and 3) trainers who can empathize with the trainees and make the training impactful and enriching. (Just as makeup artists can make an actor look either like a prince or a pauper!)

In my next piece, I’ll write more on how to go about choosing the three ‘right’ ingredients.

Sunday, January 10, 2010

Retail flavoured chai!

‘Indian Retail’ is like ‘masala chai’. The adjective ‘Indian’ lends a certain flavour to retailing that is similar to how the adjective ‘masala’ tries to qualify an otherwise universally worshipped elixir-of- life called ‘tea’.

We have heard and read about how retailing in India is very unique and different from what it is in other parts of the world. How India itself is many cultures, languages and in fact; many countries wrapped into one and therefore, it is usually argued that mass customisation is never possible for the Indian market. Here, one size certainly doesn’t fit all! Retailers complain of not being able to apply a uniform merchandise mix or a uniform pricing strategy across their stores. They can’t also run uniform promotions and maintain uniform stock levels. They say, retailing is challenging and customers lack loyalty; they are bullish value-seekers; ruthless and unforgiving.

I feel, just as the ‘masala’ in the chai can be cardamom; cinnamon or ginger or a combination of all of them; retailing in India comes with its unique flavours and idiosyncrasies. Here, I am trying to sniff and smell retail and decipher from the different layers of evolution (from experience both, first-hand and second-hand), the deep rooted influences of the times; just as a tea-taster would look for the colour, aroma and flavour of tea to decipher its season and grade.

It doesn’t seem unusual that hailing as we are from the oldest civilizations; we Indians began to trade with each other much earlier than the rest of the world. I recall from my fading memories of school history textbooks that the exchange of goods and services in India predates the birth of Christ. I guess our ancestors pioneered the barter system and used it very successfully until currency was invented. I understand that the hunters, gatherers and agriculturists began to exchange one produce for the other - that lay the foundation for trade in India. Stones used in making weapons and metals used in making jewelry were amongst the most popular of accepted currencies that formed a precursor to coins that came into existence around 680BC. It is small wonder therefore, that we are known as a nation of shopkeepers – the supposedly 12 million retail outlets bear testimony to the fact that we are innately wired for trade, commerce and entrepreneurship.

Exchange of goods first happened between individuals – say, where one with a surplus of wheat but in need of sugar; and another with sugar in surplus but wanting wheat; exchanged the two commodities in a simple face-to-face transaction. This perhaps paved way to where a bunch of guys with different products each, got together and discovered they could benefit from exchanging them with each other, causing the creation of complex commerce much like what happens on e-bay today; but sans the virtual infrastructure and credit or debit transactions.

I guess the next stage of evolution in exchange of goods was through community congregations in small villages and towns – known popularly as fairs or flea markets. In a way, these flea markets were makeshift malls – a collection of merchants, each selling a different produce; capitalizing on the collective power to draw traffic due to the ‘destination effect’ that merchants, as individuals could not attract by themselves. Next came the nomadic versions of these fairs; that moved from one village to another and camped at each village for a certain period; providing the local consumers with opportunities for shopping; leisure and entertainment. For most of the six lakh villages in India, such fairs and flea markets are the primary sources for meeting their routine family shopping needs.

Somewhere down the road, Indian merchants came to accept the fact that it is important to reach out to their customers. They stepped out of fairs and ventured in search of their customers - a true case of the mountain going to Mohamed! Thus evolved mobile retailing – a model that every product category from ice creams to water purifiers has embraced in the modern times!

Tradesmen went on foot from street to street and house to house carrying their wares. They announced their wares (marketing – ATL to be precise) as they walked the lanes so that people could be drawn out of their homes. When they were successful in piquing people’s curiosity; they tastefully displayed their wares (visual merchandising). The merchant carrying bangles would carry a bundle each over both his shoulders; with those glass bangles glistening in the scorching sun; blinding the greedy housewife that looked at them longingly. They stopped by and accosted the woman and got her into a conversation (not necessarily with an intention to sell, but to very innocently drop the fact that the neighbour two doors away had become the proud owner of the latest bangles in town!). The merchant didn’t have to take lessons in psychology to know that women generally don’t pass an opportunity to be one-up against their neighbours and so she would begin examining the bangles. The merchant then allowed her to touch and feel the bangles and he even slipped a few bangles on her slender arms (with her permission of course!). When she was smitten by their colours and designs and was convinced that they would look better on her arms than on her plump neighbours’, she would not hesitate to part with her savings - stashed away in the earthen pot atop the attic, from the prying eyes of her drunkard husband. The merchant knew how to induce purchase through free sampling (BTL if you will). He of course possessed in abundance, the gift of the gab to talk her into buying – ‘selling skills’ that made an instant connect with the customer.

Having successfully acquired a customer; he would then proceed to understanding her preferences – knowing precisely what colours and patterns his customer liked so that he could come back to her with new stock – building “loyalty” through “customer intimacy”. Merchants dealing in different merchandise adapted different means of transport. The bangle merchant went on foot; the utensils seller used a push-cart with his wares hanging from wires strung around four posts at the corners of his cart; the vegetable vendor would tie a circular basket or two on his bicycle or would tastefully display his fresh produce on a gunny bag spread over a push cart.

I suspect that the credit for the sobriquet that India is a nation of shopkeepers; should squarely go to the Indian middle class and its business savvy. Middle class families that owned pieces of land were smart in making investments that bore fruit. They knew about annuities and cash flows more deeply (but crudely) than today’s wealth management experts. When they built a building on their piece of land, they added a couple of small eight by eight or ten by ten compartments on the ground floor facing the road and fixed shutters on them. This instantly converted the ‘shops’ into a revenue earning annuity when they rented them out. This ensured that the family would never go without food even if the bread winner were unable to earn. All they had to do was to find an enterprising soul to set up his wares there. I would imagine a hitherto travelling salesman - who had amassed enough credibility or had enough savings to serve as capital; or both - would make an ideal candidate to establish a ‘shop’. The first obvious choice of format was a shop that catered to the day-to-day requirements of its immediate neighbourhood – thus emerged the kiranas . Other formats that made their presence alongside were a tailoring shop; a bicycle repair shop (that would later metamorphosis into a two-wheeler mechanic); a laundry; a men’s salon and a few assortment of shops. This rash of raw ingenuity, when replicated across the million lanes and by lanes of India; spawned entrepreneurship; market penetration; new format introduction and what have you.

For a middle class family; the shop on the ground floor also served as an outlet for an entrepreneur within the family – either as a pass-time for ageing but active elders or for the second or third son of a wealthy farmer - who was more adventurous than his agriculturist father – and decided to forward integrate into retailing to sell the produce his old man produced on his farm. He typically catered to two or three streets in either direction and would therefore know the man and his wife and their children of the one hundred odd homes in the vicinity. Besides knowing the head of each family by their first names and occasionally (by their second wives); the shopkeeper would soon learn their personal preferences – brands; pack sizes; quantity required by each family; their periodicity of purchase and viola; he had his buying plan. He would by now have figured out how often his vendor’s salesman visited his village and would therefore order just the right quantities to last for the week or the fortnight as the case may be. There was no question of unsold or dead stock. Therefore, there was no markdown – planned or unplanned! There was also no shrinkage until his business grew in size and necessitated employing assistants! Only that a tube of toothpaste here or a bar of soap there or a kilogram of rice would go missing only and when the shopkeeper – out of sheer samaritanism - employed his second cousin’s good-for-nothing son as a store help!

So, what middle class families did to ensure a continuous source of income by creating shops in their premises; turned out to be a bank of juicy real estate for budding and aspiring retailers. It also became a capital investment for a family member who wanted to set up a business. When the second son of the farmer got married - as if in one masterstroke and a very strategic one at that – he acquired a pair of hands that could serve him as store help for practically no cost – just as a prince would marry the daughter of one of his vassal kings; settling politics with pleasure! If the business thrived; he would rope in his siblings or cousins and occasionally his parents and there he had an extremely successful store fully manned with reliable staff at zero manpower cost!

The shopkeeper had barely gone to school and so had his new wife or other store help. Therefore, education never figured in the scheme of things, and least as part of the eligibility criteria for the retail store. Apart from offering meaningful occupation to the entire family, this phenomenon fostered entrepreneurial spirit. It required very little working capital as the shopkeeper bought small quantities of merchandise each time and also enjoyed supplier credit. His low inventory model and quick replenishment ensured freshness of stock; facilitated a deft introduction of new products; increased stock turns and therefore a healthy GMROI. Add to this, practically no manpower cost and no shrinkage and (if the shop was located in the family-owned premises as most often was the case) there was also no rent outflow. Therefore, there was very little operating expense and that left little difference between gross margins and EBITDA or even PAT!

Indian entrepreneurship is too resilient to go out of fashion; and more so, its retail entrepreneurship. Panning our vision to modern retailing, we soon realise that customers have changed in their awareness and preferences. “Value” - an intangible that could take the form of price; quantity; durability (but surprisingly not so much quality) keeps customers and retailers go round and round in circles. Product and price differentiations are obliterating boundary lines between brands and retailers.

Only lessons culled out from this evolution - rich in essence and potent in sprit – can come in handy for every retailer to get closer to his customer. Home-made recipies may serve well for ‘Masala Chai’ but, retailing requires more than a fair share of willingness to constantly learn. Any retailer who cared to invest in applying these learnings to suit his business model; would benefit from the blessings of time-worn retail basics.