One of the major advantages of
organized retail, apart from low prices, is the vast array of choices it
provides to the consumers. In the last few years, the rapid increase in the
number of super-markets and mega-markets in the country has been accompanied by
an explosion in the varieties of every imaginable merchandise that populates
their shelves.
But like many other
transformations that retail sector has been undergoing, a rather unexpected one has been gaining grounds, and it is not so recent. Retail giants like Walmart are already cutting down the
huge number of choices offered in their stores, favouring only selected
varieties which are generally preferred by the customers. But how does this
make any sense? As it turns out, organized retail players all over the world
are facing heat due to at least one of the following factors:
1. Rising
real estate prices,
2. Expenses
of managing a large number of SKUs, their supply chains and
inventories,
3. Loss
of opportunity of tapping consumers in urban centers where space is a scarcity and
huge shopping centers cannot be established and
4. Loss
of opportunity to tap communities of consumers in rural areas, which are too
small to sustain a super or mega market.
These are also the significantly
responsible reasons for the losses being incurred by almost all the organized
retail players in India. Stocking a large number of products and their
varieties calls for huge real estate investments, and that has been made very
difficult by the sky-rocketing real estate prices. Towns and villages are
usually dominated by unorganized retailers as they have been so far neglected
by the organized players.
Another important aspect is related
to the consumers. It has been found that though providing some variety boosts
customer satisfaction, going too far might lead to “customer confusion”. Too
many choices overwhelm the customers and lower their buying intent. The
solution lies in bringing to them a few, “well-researched” types of products
instead of too many varieties. This is the simple concept of “Less is More”. So,
in a nutshell, this enables the organized retailers to achieve the
following:
1. Better
customer satisfaction,
2. Lesser
number of SKUs to manage and hence simpler inventory,
3. Ability
to establish small-sized stores with low real estate investments and
4. Ability
to establish small-sized stores in urban centers as well as in rural areas.
It follows that Walmart’s
decision of opening dozens of scaled-down stores in the near future is not
surprising at all. It is interesting that some Indian retail giants have already been following this model. One close example could be the Mumbai based D-Mart. Future Group also runs a chain of small stores called KB's Fair Price, apart from the giant Big Bazaar stores.
“Less is More” has far wider implications than what appears from this article so far. For example, in a recent interview with The Economic Times, the MD and CEO of Bajaj Auto Mr. Rajiv Bajaj stressed upon the relevance of this idea to the competitive motorcycle market. Apparently, this has allowed Bajaj to gain a strong position in the market in the last few years. Though the top position is still held by Hero Motocorp, Bajaj Auto has stunned everyone by becoming the most profitable motorcycle manufacturer. The company claimed 58% of the total profits generated by the industry in 2010-11.
“Less is More” has far wider implications than what appears from this article so far. For example, in a recent interview with The Economic Times, the MD and CEO of Bajaj Auto Mr. Rajiv Bajaj stressed upon the relevance of this idea to the competitive motorcycle market. Apparently, this has allowed Bajaj to gain a strong position in the market in the last few years. Though the top position is still held by Hero Motocorp, Bajaj Auto has stunned everyone by becoming the most profitable motorcycle manufacturer. The company claimed 58% of the total profits generated by the industry in 2010-11.
As the companies go “on diet” to
become more efficient and move faster than the competition, the focus will now
shift on selecting the “right diet” or the best choices to be provided to the
customers.
2. In Store Aisles, Less is More but Customers can still be Particular - The Globe and Mail
3. Less is More for Walmart, Other Retailers - CSPnet.com
3. Less is More for Walmart, Other Retailers - CSPnet.com
4. Strategy is Nothing but Specialization: Rajiv Bajaj, MD & CEO, Bajaj Auto - The Economic Times
5. Retail Chains Witness Growth but Widened Losses; Rs. 987 Cr Hit During 2010-11 - The Economic Times
6. Aditya Birla Retail Plans to Shut Down More than 3 Dozen Stores and Lay off More than 150 Staff - The Economic Times
The writer of this article, Akshay Agarwal is a PGP student of Indian Institute of Management, Raipur and has done his B.Tech from Indian Institute of Technology, Guwahati.
5. Retail Chains Witness Growth but Widened Losses; Rs. 987 Cr Hit During 2010-11 - The Economic Times
6. Aditya Birla Retail Plans to Shut Down More than 3 Dozen Stores and Lay off More than 150 Staff - The Economic Times
The writer of this article, Akshay Agarwal is a PGP student of Indian Institute of Management, Raipur and has done his B.Tech from Indian Institute of Technology, Guwahati.
