INNOVATION SPECIAL...Innovation with a local touch hard to replicate

Innovation with a local touch hard to replicate

In the last two years with the global recession trickling down through India’s shores, there have been concerns expressed about profitability in Indian retail. There is little doubt about the topline potential of the market – recent statistics released by the UN shows that per capita income in the country has crossed the “tipping point” of $1,000 per annum. Modern retail in India is stuck with high property and operational costs with low sales transaction sizes. In response to this combination of inherent consumption demand and a tight cost structure, retailers in India have started to develop indigenous models of innovation in space, merchandise, price, people and processes. Space At one end of the spectrum, there are Quick Service Restaurants (QSRs) like Dominos which have leveraged on the innate cultural custom of personalised service to reduce their space requirements. The product promised has changed from “good taste” to “on time delivery”. Another example of space innovation is the food courts in malls where there are common seating areas with differentiated kitchens – leading to better per square foot yield for all the members of the food court. Another example is the Hazratganj market in Lucknow, which was a traditional bazaar. The retailers realised that they needed to modernise and upgrade the stores. In partnership with the local government, a market renovation plan was created which included widening the road, streamlining the flow and direction of pedestrian traffic, introduction of a common collaborative store front and the like. The result has been a market which melds the organisation of modern retail with the warmth and charm of the traditional format – an excellent example of a successful public-private partnership model. Merchandise Haldiram’s has taken a local specialty and created a new food category. While branding, distribution, packaging are all key elements, the main change is that Haldiram’s products have more flavour than spice – as it realised that the customer was looking for a chai-time accompaniment which was more “namkeen” than “teekha”. Another example is Zoomin, an online camera store. The company has realised that digital photos can quickly become e-waste if not viewed often. So, Zoomin allows customers to build and personalise photo-books. Price Innovation on pricing is rarely just about lowering prices – it’s about increasing the pace, depth or breadth of consumption. E-commerce platforms are creating new methods of getting consumers to buy products on line using special day pricing and couponing. This has transformed customer behaviour – extending the ‘urgency’-led behaviour seen during sales onto the online world and converting the causal surfer into a paying customer. People For stores such as Metro Shoes, Nallis, creating a palpable sense of kinship among the staff on the floor matters much as it can create differentiability and competitive advantage. When ‘Sharavana Bhavan’ set up its Delhi restaurant, it staffed the entire unit with people from the same village in Tamil Nadu, arranged for Hindi classes and housed them in the same apartment complex. The sense of shared belonging was reinforced by off-work socialisation, transposing an essentially South Indian brand into the Delhi market. Process In 2012, companies like Flipkart and Jabong.com have used the concept of Cash on Delivery to ensure that the customer’s distrust of the e-commerce space has been overcome. The retail industry in India has also taken a leaf out of the automobile industry’s book by using the same methodology pioneered by Toyota’s JIT production systems in the 1960s. Many of the large format food retailers have integrated their systems with their suppliers and merged inventory management processes. This ensures inventory turns are maximised and stock-outs reduced. For both food and fashion retailers, this is critical because their inventory is perishable. Retailers in India have learnt from Zara – the original pioneer – where they turn their stock 23 times a year. Conclusion In the past few years, Indian retailers have learnt the need to contextualise innovation and make sure that global models of innovation are correctly contextualised for local cost structure and customer preferences. The innovation models presented above are incremental – i.e. they are evolutionary rather than revolutionary and because they provide a level of differentiability which cannot be easily replicated. Kumar Rajagopalan ,CEO,Retailers Association of India DNA120905