|While organised retail in India may be growing at a fast pace, is it on the right track? Are retailers offering consumers a fair deal? What influences buying decisions "" is it still advertising?.
Paco Underhill, author of bestsellers Why We Buy: The Science of Shopping and Call of the Mall: The Geography of Shopping, and founder and CEO of Envirosell, a New York-based research and consulting firm focused on studying retail and service environments, says Indian retailers should stop imitating the West, and look at emerging markets for inspiration. He says traditional advertising no longer works as effectively as it did in the 1990s, and retailers need to focus a lot more on point-of-sale shopping experience. In an interview with Amit Ranjan Rai, Underhill defies some of the conventional notions associated with organised retailing. Excerpts:
Is Indian retail booming? What's your take?
Is it booming? I don't think so. Organised retail is still less than 10 per cent of India's basic turnover.
Look at other emerging markets where organised retail seems to be moving from 10 to 40 per cent of turnover, those are places where retail is booming. Retail should be booming in India; the question is why isn't it?
It's a very valid question. Indian consumers have every reason to be angry, because they deserve better than what they are getting. They deserve better prices, products and services. India has the opportunity to go from the 19th century to the 22nd.
My suggestion is don't copy the West. Reinvent the process locally. This is the time for Indians to be creative in what they do. They should learn from other emerging markets instead of the West. Rather than looking at New York, London or Paris "" where the retail evolution is, in many cases, 200 years old "" look at Brazil, Argentina, Mexico or Korea, which have all made the same transitions, but in the past 20 years.
What should be the approach for growth?
Indian companies and retailers should approach the issue without fear. Retail has historically been about life and death. Which means that retail businesses rarely last more than two generations.
The idea that somehow you need to preserve the structure of the small family businesses is like saying you need to protect people who make bricks by hand. Local business does fine all over the world, but it does well when it specialises, and when people approach it with passion.
There are many Indian merchants who I think have a passion for the business, but many are doing it because it is a legacy occupation.
But unorganised retailers are going to be hurt...
I don't know what does it mean to be hurt. Does it mean that someone is not able to find a job? What it means is that there are going to be people whose lives are going to change. The transition here gives people other opportunities.
Germany and Switzerland are two examples where the government attempted to legislate the protection of the small family business. And part of what that has led to is higher consumer costs.
For a small group of people, everybody pays the price. If you are a German consumer, and you live close to France, you go across the border to do your grocery shopping. The same is true with Switzerland.
The sheer number of malls that have come up is quite astounding. How do you see all this?
Part of the problem is that most of them are poor copies of what we built in the West 25 years ago. We then built malls that were ugly, and they are uglier still 25 years later.
Can you tell me a mall in India that is beautiful from the outside? Can you tell me a mall in India which can become a landmark status, and people would like to preserve its architecture in future? I don't think so.
There is reason beyond just shopping to go to a mall. There is art to look at, there is sculpture, there are art performances, concerts and events, inside a mall. I have seen some beautiful stores but I have seen no particularly inspired public spaces.
In other parts of the world, particularly in emerging markets, say, in Brazil, many shopping malls operate their own bus services. During the weekdays there are vans that go to the local office parks to bring people for lunch to the mall.
Malls are also places where one goes to dine and to be entertained. The Vasco da Gamma centre, one of the most beautiful malls in the world, in Lisbon, has trouble people getting to leave at one o'clock at night. I am yet to see anything like that in an Indian mall.
Your firm focuses a lot on consumer behaviour and point-of-sale retail experience. One of the points that you make is that point-of-sale retail experience is much more important than marketing...
In the developing world, somewhere between 60 and 70 per cent of all purchase decisions are either made or influenced at the point of sale. Someone may look at brand awareness if they wish to buy a printer, but it they walk into a store such as Staples and they look at all the technology that is there, they may walk out buying something else.
Samsung has triumphed Sony as the primary source of consumer electronics. The idea that consumers buy electronics based on the technology inside may have been true 20 years ago, but it is not true today.
Why is it so?
These days you aren't throwing things out because they don't work anymore, you're throwing things out because you want something that is new. You're not changing your mobile phone because it's doesn't work, but because you want a new mobile phone.
What about brand loyalty then?
I think branding is a 20th century term, and while the concept still works, it doesn't as it used to. Retailers are looking at new tools to understand the nature of the consumer mindscape.
The traditional things taught in business schools "" branding, sales, advertising "" aren't that effective. Advertising as a concept doesn't work in 2008 "" it doesn't work the same way it did in the 1990s, and worked rather differently in, say, 1955. When a person bought a car in 1965, he knew before he walked out of the house the car he was going to buy. Now, when we step out, we have two or three different cars in mind. The concept of loyalty to a brand, while it exists, is based on many more things than it used to.
So much money is being spent on advertising and branding exercises...
That's a major issue for us in our culture. Let's recognise that there are engines of marketing other than media advertising that have worked just fine. It may not be the case here in India, but in other parts of the world, be it billboards, viral or online marketing "" each of which builds buzz to get people talking "" they have been quite effective.
So should companies relook into their spendings on traditional TV or print advertising?
Those forms of advertising are a part of the mix "" but they are a traditional part. One of the things that we are looking at is the triumph of creativity over money, that is, how can I be creative rather than how much money I have in my advertising budget?
One of the tragedies is when a company has very hip advertising for a store, but a consumer walks into the store to discover it's not all that hip. In 1990, Kmart had price-winning advertising "" it was very hip and cool.
But when you moved into the stores, they were dirty and out-of-stock. People reacted along the lines of 'how can they tell us it's such a fabulous place when it is actually not?' It's important that the advertising and the experience one has in the store, match up.
How can retailers improve the consumer's experience in a store?
They need to understand the nature of the consumer. Organised retail has to be sensitive to local tastes and trends. It has to look at communication issues. It has to realise that the primary engine of Indian consumption is still women.
So much of organised retail is owned, managed and designed by men. One of the questions we ask over and over again is if a particular store is female-friendly. Do you have female-friendly dressing rooms? If you think of the conceptual design of a dressing room for a man against that for a woman, they are different.
What's the best form of advertising that a store has? It's not a TV commercial; often it is a cool shopping bag. It's the paper bag, it has a design on it "" logos, cartoons and so on. It has design equity. These are simple things that can be taken care of.