Tag: HUL

With apologies to none at all

When I passed out from business school more than 35 years ago, India had not even entered the world of malls. Retail meant mostly mom-and-pop neighbourhood stores and every FMCG company worth its salt was into the depth of distribution. The role of wholesalers, in the Indian context, could never be overstated. While western marketing authors always used the words distributor and wholesaler interchangeably, In India depth of distribution meant huge dependence on wholesalers. Even for the HULs and the ITCs.

But B-schools hardly explained the Indian wholesale phenomena. At best wholesale was referred to as buying in bulk, cheaply and then distributing it to retailers and earning good margins. In reality, it was almost the opposite. Sorry, not was. IS. Even today, wholesale is referred to as cheap. In fact there is a neighbourhood modern store in my area which is called Wholesale Store just because it claims to be at least 5% cheaper on almost everything.

For the uninitiated, wholesalers in India buy across product categories, unlike most distributors. And it’s not just 5-6 categories but maybe 30-40 categories. The idea is to service kirana and groceries in small towns and villages with everything that they need. These shops may buy 20 soaps and five 1 kg detergent powder packs a month. A distributor cannot afford to service them as the margin on those small quantities does not cover even his/her transportation costs. A wholesaler, by servicing the whole gamut of products in a small kirana store, makes margins across product categories that allows it to make profits. And this allows sales at thin margins, in effect sometimes enabling a kirana store to sell below MRP. And that’s why the myth of wholesaler buying in bulk, selling cheap. S/he buys in bulk but across many product categories. S/he sells cheap because his depth of product categories allows him to do so.

Since the last 35 years, trade has evolved rapidly. Modern trade, which is local supermarkets, emerged. They made shopping a pleasant and an involved experience. From dinghy, badly lit kirana stores, one could touch, feel and see the variety at offer.

But it was the malls that shaped this modern trade into supermarket chains. The now-defunct Big Bazaar was the pioneer. There was Spencer too. And malls and big supermarkets were made for each other. Malls had big brands. In apparel, footwear. Electronics, fashion, etc. But the problem was that after the novelty wore off, the consumer would not visit regularly. One does not buy branded clothes or footwear or electronics every month. It’s maybe twice or thrice a year. Malls wanted footfalls every day.

That’s when the concept of anchor stores came in. Consumers need groceries every week. So, if a mall could get a good supermarket, consumers would come in every week. And these would be located either on the top floor of the mall or at the end of a vast one level mall. The idea was that the consumer will get to see other stores and would be tempted to walk in, browse around and get attracted by offers. In fact, within a supermarket too, this concept works. Vegetables or daily products like milk, eggs bread are always at the end of the supermarket. So that you walk through the entire display and are tempted to buy more.

Now, if consumers come in once a week, can we get them more than once? ‘Super Wednesday’ with the concept of mid-week replenishment came in. Or the concept of cheapest first seven days of the month. Traditionally, the local kirana would give credit which would be paid off in the first week of next month, once payday happened. This was one step ahead. Buy in advance for the month when your pay day happens. Stock up for the month.

The concept of anchor stores got extended into multiplexes, food courts. All again on the top floor or at the end of the mall. Malls without anchor stores struggle. Even today.

Retail had definitely evolved

E-commerce of course changed retail forever. People call it retail at a click, I call it retail on wheels. It brought everything, even apparel to your doorstep. It made you lazy but it opened a new concept call gig workers. The delivery boys and girls. I would love to see some hard facts but I think that Dehradun, where I stay at least 20-30% of two wheelers on road are into delivery. And these have become brands in their own right. Ekart, Delhivery.

But I digress. We think ecommerce changed the way we shop because they gave discounts. That’s a fact which cannot be disputed. But discounts were the sop. Today, we are used to paying delivery charges. One feels good that a saving of Rs 30 has happened on a Rs 250 order, but we also pay Rs 30 as delivery charges. Delivery charges have become so commonplace that free delivery today, is an effective promotion. That is the price we pay for the wheels. That’s why I call it retail on wheels.

And today we are in the age of Q commerce. Quick commerce. Retail on steroids as I call it.

I don’t think it’s about the 10-minute or 15-minute, quick delivery. I think it has touched the psychological sweet spot of completing the full shopping experience in a few minutes. Let me explain.

Twenty or 30 years ago, shopping meant having a shopping list and going to the market to shop. One would spend maybe an hour or so, but in that one hour choosing, deciding, haggling, weighing and paying would happen. And one would be back home with the full shopping. Done and dusted.

E-commerce actually stretched the shopping experience into days. Sure, one has a list. One clicks and checks out. But then one has to wait for delivery. It could be 24-72 hours. It causes anxiety. Will someone be at home when the order is delivered? Will all the stuff come? Will there be some mistake in the quantity? Will the quality be satisfactory? To assuage these came delivery on fixed time slots, return policy etc. But it was ironical that the shopping experience took longer to complete.

Q commerce actually is a panacea to that. It came at a time when consumers were used to discounts. Q commerce offered it. Consumers were used to delivery charges, Q commerce extracted it. In fact, during certain hours Q commerce charges rush surcharge. And yesterday on Blinkit I saw a rain surcharge and it said that it’s raining heavily in the vicinity of the store so…. You get the point.

But, more importantly, by delivering in 15-20 minutes, Q commerce rounds up the full shopping experience and frees one from all the worries. That’s why it’s been such a big success. It’s like going to your neighbourhood store and buying three-four things and coming back in 10-15 minutes. Except, this neighbourhood store also sells iPhones and pooja thalis.

And like anchor store,s Q commerce is trying to make you visit more often. Just one example to explain this

Big Basket every day morning sends me notification of some deals. All offers for Rs 29. Sometimes for Rs 10. Or BOGO. Buy one get one free. Or flat 15% off on bakery. Now it’s a good trick to get one to browse. Rs 10 could be a small Lays packet or a small scrubber or even 100 gms ladyfinger. But with that the bigger packs or larger quantities are also available. So, when I click the option, I may not want 100 gms ladyfinger but definitely 500 gms, so I buy that. In lure of Rs 10 I have entered the store and done shopping which I was not planning to.

I started this column with the grouse that one never learnt wholesale distribution during MBA, I suspect it doesn’t happen even today. Do MBA courses keep pace with the evolutionary trends? Is Q commerce in the curriculum. Is the difference between Omnichannel retailing and multi-channel retailing being taught? Has the faculty participated along with the industry to understand the evolution? Or are the colleges and Universities just paying lip service by taking a guest lecture or two on the topic. Or holding a webinar?

This column is not to criticise but to reflect upon how much has changed in the retail sector and are our MBA courses reflecting those changes?