Indian IT Industry to “Cruise in the higher orbit” by Rajesh Korani

A recent article in The Times of India by Mr Mohandas Pai (Chairman of Aarin Capital Partners & Manipal Universal Learning & former director and head of Human Resources at Infosys Ltd) about shrinking profitability of Indian IT companies and an option of going up in the value chain triggers an alarming bell for the industry.  Among Indian IT companies, Infosys enjoys highest per employee net profitability i.e. US $ 11400 per employee and stands at second position (IBM enjoys highest per employee net profitability i.e. US $ 36586). But the current situation definitely invites proactive   call-for-action if the desire is to incessantly enjoy the similar growth & profitability. 

In India, IT industry is considered as one of the most aspirational industry amongst youngsters for career option. However, companies in USA, UK and Europe those who are outsourcing Technology implementation jobs to India, ponders it as a hub of talented manpower at low cost. I’m not refuting the fact that Indian IT companies journeyed a long way in the last two decades to emerge as technology partners from low cost IT vendor. But the perception has still not changed in the source countries. Global IT & Consulting companies like Accenture have already established full-fledged development centres in India and are in the league to execute technology implementation jobs from here. This surely upsurges the problem for Indian IT companies to revisit their business strategy, because Accenture’s strong positioning of business consultant gives them an edge vis-à-vis Indian IT companies. They have the bandwidth, expertise and proven legacy of taking up high level consulting & technology projects and now with Indian offshore office it brings low cost implementation capability and strengths as well. 

So what it means when Mr Pai says “Going up in the value chain”?

What I derive from this statement is that Indian IT companies should elevate their brand perception to get into the territory of ‘CEOs’ i.e. become "Strategic partner for business growth". They should continue maintaining the relationship with the CIOs, but the brand perception and recommendation should flow from top-to-bottom and not vice-versa. It is obvious that elevation towards the customers’ business solution will provide an edge to Indian IT companies. In fact it’ll be a value addition for better image and better earning. The technology implementation jobs will continue to follow once Indian IT companies are comfortable in CEOs territory. It’ll also enable clients to be highly dependable on these companies and look at them as single stop solution and sole advisory partner for business growth through business consulting and technology implementation.

If this is the objective then the task for Indian IT companies become little challenging. They need to work hard to bring in-depth understanding of client’s industry, business growth drivers, challenges and anticipate the future trends which would help the customers to think and act ahead of time.  Indian IT companies need to invest in highly talented and diverse human capital, build the global team from diverse culture & multiple ethnicities which can bring large years of industry’s strategic & operational experience and can collaborate with the technology expertise to develop industry specific and customised solutions for the clients’ business growth. They need to share and implement best practices across the globe to create global image with local implementation capabilities.

What role Branding has to play here? Brand custodians will have a challenging job to position the brand on a “Thought Leadership” platform. They have to create a marketing story on the global experience and industry expertise. They need to align the brand with the culture and professional context of every country, wherever the brand has presence. They need to develop strategic communication plan that is coherent, contemporary, culturally aligned along with industry specific insights and business cues. Accenture has mastered the communication in this sector. Their brand positioning “High Performance. Delivered” is manifested not only in the communication (Refer Image) but at each & every touch point of the brand. 

Indian IT companies must wake-up to the situation, if not already. They have grown excellently in the demand led market, now it’s the time to create a strong business delivery expertise and brand excellence “To cruise in the Higher Orbit”

 

The entailing art in retailing by Rajesh Korani

You would barely find an individual who has not heard about the booming opportunity in organised retail industry in India. It has fascinated world’s top notch retailers to spread their footprint in this flourishing Indian economy. So we all know that there is huge opportunity and I’m not going to tell you the same old story. Rather, I’d share some insights, or my analysis that albeit of visible opportunity why retail industry in India didn’t propagate to the estimated levels in past 10 years.

My foremost question would be “Are we trying to reinvent the wheel?”

I’d say a huge ‘YES’ to that question! Although, organised retailing is a new concept in Indian sub-continent but it is a well-practised phenomenon in the west with a penetration over 95% vis-à-vis 6% in India. McDonald’s has experience of running 30,000 successful stores, Wal-Mart  10231 stores, Carrefour 9000 stores, Tesco 6351 Stores. Over a period they have cultured the art of retailing and have developed best practices to manoeuvre each store as a profitable SBU. So what exactly the strategy is? I would say it’s a mix of art, science and technology which has led these retail giants to attain excellence in ‘Art of Retailing’. The core of successful retailing is hinged on four key pillars

• Catchment
• Sourcing
• Footfall
• Conversion

The entire strategy, positioning, merchandise, pricing and service depend on these four fundamentals.

Retail Catchment

Catchment:

McDonald’s spends tons of monies to evaluate the catchment potential contained in 5Kms radius before finalising the store location. In last half-a-century of existence they have shut merely 700 (approx.) non-performing stores. Rest of the stores drive high footfalls and conversion from various strata of the society. All thanks to their scientific analysis of catchment population in the competitive scenario. So what’s involved in catchment analysis?

• Competitive environment: Unorganised retail, low price, highly discounted price, whole seller, counterfeit, cart seller, hawkers corners & organised retail
• Detailed Shopper profiling: Location surroundings, Quantitative segmentation, Income Group, Family type, profession and socio-psycho behavioural patterns of the shoppers
• Selling Situation: shopper affordability, retail characteristics, merchandise mix and unparalleled product mix

Sourcing:

Sourcing strategy for any retail whether food/grocery, fashion, multi-category, electronic should be in a constant state of flux, shifting to take account of changing markets, competition, costs, risks and opportunities. Sourcing Strategy must be aligned to the overall business strategy and its future objectives. A few imperative parameters to be addressed before putting sourcing plan are - 1) the right regions/countries you are going to source it from now, and in five years' time. 2) What are our financial targets (cost vs. price,) 3) what processes (import duties, local taxes, exchange rates or other taxes) can affect the financial performance. 4) What is the lead time to bring merchandise to shelf? 5) Local infrastructure, warehousing, cold chain and local supply-chain.

Retail giant Walmart has unveiled a new global sourcing strategy designed to reduce costs of goods, accelerate speed to market, and improve the quality of products. The strategy involves the creation of Global Merchandising Centres (GMCs), a change in leadership and structure, and a strategic alliance with Li & Fung, a global sourcing organisation. Walmart vice chairman Eduardo Castro-Wright said "By realigning our resources, leveraging our scale, and restructuring our relationship with suppliers, we will enable our businesses around the world to offer even more competitive pricing on merchandise and to provide our customers a clear and compelling assortment of better quality products at lower prices." In India, from past 3-4 years Wal-Mart is strengthening their backend systems, processes, vendor finalisation, local supply chain and warehousing, to ensure once they go full-fledged, there is no looking back.  

Footfalls

Shoppers

Retailers must define “what would be the footfall driver for each store”. Merchandise variety and options, unparalleled product choice, Store planogram, in-store ambience, front façade, in-store service are a few key parameters of footfall drivers. Depending upon the type of retail the ratio of planned shoppers vs. impulse / passer shoppers varies. For e.g. A successful fashion retail experiences 60% passer-by shoppers entering the store whereas 40% planned shoppers unlike grocery retail which is vice-versa. Diesel store at 5^th Avenue NY changes their façade every two weeks to sustain the excitement and new-ness at the store. This ensures increased number of passer-by shoppers. This is Diesel’s one of the key strategy to drive footfalls at the store. One mantra for the retail is “An empty store intimidates the shopper and a store with lot of people invites the shopper" 

Conversions

Wallet Share

This is one of the main issues encountered by utmost retailers. Although, the catchment marketing/advertising drives a lot of footfalls but retailers fail to get maximum wallet share or conversions. Conversion doesn’t function in isolation. Your product mix, pricing and service makes the difference. Conversion happens if shopper spends maximum time at the store. In-store sales staff plays imperative role here, but careful the in-store sales staff mustn’t infuriate the shoppers. Pricing also plays key role in conversion. If a shopper has entered the store due to brand-pull an inviting price ensures conversion. Christian Dior stores experiences huge volumes (conversions) for the neck scarfs which is offered at an attractive price of $25 - $50.

Currently in India, retailers are in a rat race to open new stores. I would say, retailers’ current focus is on real estate rather creating successful retail. This is resulting in closure of stores in a short span to time.

Retailing business is a scientific business which involves joining various dots of catchment, sourcing, footfalls and conversion. I’m sure if the retailers can align these four key pillars they can master “The Entailing Art in Retailing”

 

Personal Care: An amalgamation of ‘Nature, Science & Beauty’

Research shows that women in general spend 90 mins every day to appear beautiful. It’s amazing that marketers have leveraged this aspiration to build a strong category to enhance beauty of the women! Multiple product formulations and brands are available to fulfil beauty cue from head-to-toe. Millions of dollars spent every year on R&D to bring-in new usage patterns and create a product which is not hackneyed and inspires new consumption patterns.

Let us look at the market opportunity briefly. There is crux of personal care branding which abetted category creation, increase in penetration and per capita consumption.
Presently, Indian personal care market stands at Rs 18,000 Cr ($ 4 billion). It’s clearly segmented as Beauty & Wellness, Skincare and Haircare. Most of the brands are leveraging their brand equity from single category to expand and create line extensions in other categories to buy-in consumer loyalty for a single brand. (Refer image)

If you analyse the evolution of Indian personal care market since 1995, post economic liberalisation and with the entry of International brands consumers’ awareness towards internal beauty, through a proper diet and exercise, and external beauty by using natural products for maintaining a healthy skin has increased. In such scenario brands have to put enormous effort to convince the consumer about the product and its functional benefits.

L’Oreal, Garnier, Lakme, Revlon strongly manifest scientific beauty both in the positioning and communication. They have already established the brand equity and have created consumer franchisee globally basis scientific positioning. Consumers in west are evolved and there is strong trust in the brands those who manifest scientific proof in product development and benefit. Unlike West, Indian consumers have mixed behavior; it is because of long drawn tradition and culture. Indian consumers who are exposed to global brands have developed trust on the scientific beauty products. However, there is a huge untapped market of nouveau riche those believe in mix of science and nature to gain beauty. These customers ponder that scientific beauty products are effective and act very fast but don’t last, while natural beauty products work slowly but are effective and stay for a longer duration (that’s why you will find success of Homeopathic and Ayurvedic medicines in India)

Inecto (United Kingdom

Beauty achieved through natural products is preferred over scientifically made products. Nature is perceived to be anything that is not adulterated yet exquisite. Marico’s brand ‘Parachute’ is classic example which communicates a magic mix of ‘Science & Nature’. This has led the brand to dominate in hair care segment over last two decades with largest market share. It has also enabled extension into other categories in wash and post-wash segment. I’m sure Marico would like to leverage Parachute’s brand pull in all the categories (as quick as possible) the way Inecto brand in UK has done (refer image). Inecto brand is synonymous to “Natural” in UK & Europe market. The brand is giving huge competition to other established brands in UK. Consumers’ belief in naturalness has been established through ‘Pure Coconut’ position and product line

Another classic example of beauty through nature & science is Clarin’s. Clarins Spas can be found in luxury hotels worldwide. They harmoniously bring together local tradition and the brand's unique know-how to offer prestigious, one-of-a-kind, exclusive therapy. They strongly manifest amalgamation of beauty and therapy relying completely on nature to bestow its benefits ‘the 100 % natural way’. Today, the group has presence in around 150 countries. Clarins international success is due to their exceptional product range and exceptional spa treatments of unrivalled quality to deliver beauty through nature and science

The above examples clearly evince the shift in consumers’ mindset and preferences when it comes to beauty. Whether it is product/service offering problem-solution or prevention everything has to give the end result of beauty through a balance of nature and science. If the international/domestic brands have to connect with growing Indian consumers’ then they have to revisit their branding strategies, if they have not already. A billion people country may be having billion behaviours and mind-sets but all of them look for single proposition of Beauty with an amalgamation of nature and science.