You can’t escape Big Bazaar

The latest issue of Business world has the cover story on how Biyani is in a bad shape and it will take his company more than innovation to stay in business.

http://www.businessworld.in/index.php/Retail-FMCG/The-Burden-Of-Debt.html

The reason cited for the downfall was a high unserviceable debt in a recession scenario.As customers choose to stay away or downtrade(read buy at discounts)  profitability will be the first victim.Retailers will try to save face by at least showing some top line growth by either adding stores or increasing top line by giving exceptional value to customers through promotions,deals and offers.

Many analysts have already dubbed Pantaloon retail a Satyam in the making due to their refusal to be transparent and their deftness at creative accounting practices.In the cover story I am talking about Kishore Biyani refused to talk about any Financial details.I fail to understand what’s the big secret.If I have shares or a house that I have to sell to be in business that I built over the years,so be it.

Anyways,you can read all that in the magazine.This blog is to bring to you more sinister secrets of the corporate world.

Just think about the below scenario :

1.Where does your money go ?

a) You Spend it

b) You save it

c) You invest it

d) You give it away but that’s small one  so we will leave it

Let us take Pantaloon retail and you as a case.

No matter what you do you will be at a loss just as in Casinos.If you spend your money you will pay Pantaloon a hefty Margin – as much as 40-80% in case of Apparel.That’s twice what the product is worth !I am assuming that you still got value for your money which is not the case else Retail would not be falling apart like it is.The biggest reason why sales and margins are falling is that retailers in India are offering over priced products from a costly platform.Wal Mart is a success for a number of reasons but the biggest one is that when you pick up a product and you think that it should be worth X ,you flip the tag to find out that it is much less.That’s when you are compelled to buy more and more.It is estimated that Wal Mart keeps the US economy in check and saves Americans billions of dollars not only at their own stores but basically by being the benchmark for the retail industry – like a price index.Which retailer in India does that?So much so our friends even jack up the prices in SALE and then give you schemes such as Buy one get one free etc.But ‘customer is no moron,she’s your wife’ as David Ogivly said during a session at Sam Walton Institute for retail.Many of them have realized this Quickly and have decided not be lured by such cheap tricks.

Having established that it does not offer exceptional value and takes away unjustified amount of profit from your pockets let us see what they do with that money.

In a race to have more floor space,roll out faster and borrow more money Big B will be prone to buying products from inefficient supply chains and will have to stock them at  stores in expensive malls with crazy rentals.Keep in mind that they have no long term partners and every new factory they walk in will try and fleece them just like they did with the customers.With a highly leveraged working capital position Big B’s ability to pay on time is compromised and suppliers add interest cost to their own margins,making the product costly to start with.Big B is still doing a good job on negotiation partially because it has better reach and scale but it is nothing when compared to ‘Buy, build,own and operate” model of Wal Mart.If the pace of roll out was not an issue even Kishore Biyani will agree that the best way to focus on your retail Model and not worry about shifting value preposition and cost disadvantages is to own the stores.But Reliance came and spoilt the Party.I know that’s another sad story.

Now where does Big B go for money? To one of the Banks.And why would they give him cash? For interest.And whose money was it – Your’s. But there is a small catch here.There is big gap between the interest rate that banks pay you and what they ask from you let us say when you take a Home loan.Now it is fine that you will save money and the banks will lend and give you interest but what will you do when you have a substantial chunk.Buy  a house or a car right? Remember Alice in wonderland” Come into my parlor,said the spider to the fly” You will get a loan at a floating rate which will keep going up ap and away.In my case my home loan EMI increased from 9000 Rs 4 years ago to 14000 Rs now even with my term getting increased from 15 to 25 years !

So what ? ICICI bank will make profits .The truth is ,in this particular case it won’t.Remember we are not talking about overall banking but Big B ,you and banks.ICICI Retail Ventures has a huge stake and so do a lot of other Banks in other Retail companies.Venture funds stand to loose if the investment does not yield good results or if the value is not unlocked in an FDI deal or an IPO.Venture capitalists also have a substantial knowledge of the businesses they invest in and nurture good start ups and growing companies.This is not the case clearly in India.

Now how will ICICI bank cover up.You are damn right- by upcharging you on your outstanding loans.That explains their tendency to make a fool of everyone who was unintelligent enought to take a home loan from them like me.

It is for these Venture funds that Enterprenuers get pushed against the wall and not having enough resoures of knowledge,expertise,manpower,merchandise and supply chain go bankrupt like Subhiksha did.Subbu promoted his brand like anything so he can somehow get to do an IPO and get a good valuation so everyone gets a chance to party at the cost of the investor but I guess the Gods were in your favor so he had to walk away empty handed.Had he got a chance even he would have opened his stock at a price of Rs 350-400 just like Vishal retail did and the investors would now be weeping their hearts out while the share languishes at Rs 43 falling further with each bad news.

Sorry I went a little of the story.Well not really I think I was able to set the stage for what comes next.Option c) You invest in Pantaloon shares.The market capitalization of PRIL has fallen from Rs 12000 crores to Rs 2400 crores in just about 18 months.It simply means that a ruppe that you invested in PRIL share has become about 16 Paise only.And all the while you thought that what great saving I am doing by buying at Big Bazaar.The equation is quite simple.You shop for Rs 5000 ,think you saved Rs1000,comes back and invest Rs 2000 in PRIL.It becomes Rs 320. – a net loss !!!!

No matter what you do spend,save or invest you are bound to get jacked.You know why ?There is no real value being generated and so in the long run we are all dead.In hindi they say Jab tak Topi Ghum rahi hai gaadi chal rahi hai.Satyam would have never happened if the ball kept rolling but Raju was pushed into buying Maytas as he had no more money to support operations with the fall in share market.It could be the same for the retail players too. As per Warren Buffet ’s suggestion we may see a lot of naked folks running around as the tide of high share markets withers  away.

Moral of the story -Next time you go shopping please do not bother about this article and enjoy the ride while it lasts.

(wanted to use another word starting with R but my Kapersky blocks my own blog if I did)

Sell for the body,Sell to the mind

Bhagwan Krishna tells Arjun “Idam Shariram Kaunteyam” meaning that which dissipates is the body and therefore you must not think too much about it.As retailers we must understand this law.

What we sell is almost always for the body but we must remember that it is the mind that remains constant and governs the body so whatever we do must be targeted at the consumers mind.If you can convince the mind of a 16 year old about your value preposition you can get a customer lifetime value of millions of rupees if she shops with you till she dies.In the process of reduction of the 70 odd years the body  consumes large amount of substances which the mind must fulfill.While it does that the mind is always careful and alert and tries to maximize the value in every deal it does and every transactions it takes part in.While the body wears the Jeans the comfort and fit appeal to the mind.While the tongue tastes the food the pleasure is entirely  the mind’s.While the body works hard to earn the money ,the mind decides how and when it is to be spent and what is the “value” of a product or service.

By chasing the price a retailer commits nothing but harakiri.Have as look :

1.If you get your customers because of price you will loose them because of price as someone can always offer a lower price than yours

2.You have to pay something for anything so Price can not be a source of sustainable competitive advantage

3.You do not manufacture everything yourself so your competitors can always go to the same suppliers and may be crack a better deal or decide to work on lower margins assuming they got the same price

4.What is cheap for one is costly for another so you will always be “expensive” in the eyes of a group of customers.Just as we say how much is too much we can also say how low is too low.

5.Every pit has a bottom and one day you will hit it.

So what’s the solution ? Sell to the mind.

1.You are cheap,value or expensive depending on how your target customer perceives  you.

2.You are what your customers think you are.It has nothing to do with the price on the bar code

3.Quality is in the head and not necessarily in the product.It is up to you how you drive “quality” and “price”  in the mind of the consumer.Remember the game we used to play in school.You can always make a line look smaller by driving a bigger line next to it.Similarly you can always make a product look good Quality by by deliberately keeping a bad quality product next to it.

4.And if you can successfully do the price laddering and create value at each step you can compel the customer to do what you want her to do and at the same time make her feel that I made the right choice and ripped the retailer.

5.She loves it when she thinks she has made a fool out of you and this will make sure she keeps coming back.Get them in,sell them up and get them back.Got it ?

I am writing this post as I went to a big box retailer in Sholapur and while everything was done quite well they had completely thrown away the value which could have been captured so easily by doing a better Price laddering,branding and Private label strategy.

The power of category management is not is selling as low as possible but in selling as high as your customer can pay……..and feel happy about it.

The Business of Bakwaas

The business of news has become a business of Bakwaas.A case in point is the front page story carried by Business and economy published by Arindam Chaudhary.The front Page carried a daring and blatant Question – Can Shopper’s stop do it ? Can they pull out of the slow down to become India’s Wal Mart some day.

http://www.businessandeconomy.org/19032009/storyd.asp?sid=4154&pageno=1

To my mind one  cannot get more ridiculous than this.This is cheating !!!

I am in the retail business and I have worked for Wal Mart.I know Shopper’s Stop Model too.I have interacted with BS Nagesh when he came to deliver the closing lecture in my executive program at ISB on Retail Management.He will certainly agree with me if I say that the whole article was nothing but अनर्गल प्रलाप( Incoherent Lamentation) and the headline was just created to attract eyeballs and dupe gullible folks into buying the magazine.

If they would have said that can Shopper’s become the next Macy’s of India I would have understood even though there is still very little common ground but Wal Mart ??? To start with, there positioning,business model,scale of operations nothing is comparable. Shopper’s stop has always been a very niche player serving select clients in select locations as opposed to a mass merchandising everyday Low price retailer that Wal Mart is.I don’t even think that at any point Shoppers wanted to become the Wal Mart of India.Simply put they are as different as day and night as far as retailing business is concerned.The worst bit is that there is nothing about the headline in the body of the article apart from a brief history of Wal Mart which in no way justifies Shopper’s  Stop ambitions.

Media has become so desperate today that they will come up with anything to grab attention.They will say – Can Manmohan Singh marry Bipasha Basu? Come back to read more or may be watch the truth as the case may be and then the truth will be revealed – when we asked this Question to the prime minister he said have you gone nuts  and asked his guards to chase us out.In this way freedom of the press was shamed today.Some channels have become OSAMA/OBAMA channels and others rely on Snake and Ghost stories to keep their channel alive.Dekhiye ye Shaqs kis tarah se saapon ke saath na sirf  khaa raha hai balki unke saath so bhee raha Hai.Break ke baad hum aapko dikhayenge ki yeh saapon ke saath aur kya kya karta hai to hamare saath bane rahiye.And you start thinking – saala saapon ke saath sex wex to nahin karta ?

The word exclusive has been raped beyond recognition.Every beaten to death story is exclusive.You know why ? because no one else than those who made will  watch it or may be it is exclusive for morons and idiots.These program should have an M/I rating and should come with warning – mental discretion required.Not fit for those with active minds.

Then there are news anchors who act and dress like villians and Dev D’s.. Their emotional atyachaar,By God ! Arnab Goswami and Rajat Sharma are champions.In some of the debates it looks like they will start crying and howling and slap the participants.The best part is that these guys will not give a chance to the participants till they have made sure that whatever they got from the research team has been said.After all they have wasted so much time and paper on it.Its funny and frustrating at the same time.

http://karthik3685.wordpress.com/2007/11/27/contender-1-for-worst-indian-journalist-arnab-goswami/

The above link has got 410 comments  so you know what I mean !

Finally the ads seem to be sponsoring the news as well as the events being talked about.Just today Maneka Gandhi was saying something about her Pappu did’nt dance but an ad for Amity University kept appearing right on her face.It looked as if her Sari clad body has suddenly decided to replace her head with Amity University.

These days one should read at his own risk and watch TV only as a source of cheap comical entertainment.The message is simple – when we do not apply our brain while making the programs or writing silly articles why do you want to take the pain.

Thank God we still have the good old newspaper and writers like MJ Akbar , Vinod Mehta and Jug Suraiyya who are a delight to read.If you call the above Tamasha development of media and technology ,I feel I am better off with DD and All India radio.

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