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Wednesday, 27 August 2014 00:00 - - {{hitsCtrl.values.hits}}
By Senuri De Silva Power shift
Cargills Ceylon PLC Deputy Chairman and CEO Ranjit Page in his keynote speech spoke of the power shift to the consumers from the retailer.
He said: “You cannot develop a business by only targeting a few people. This has changed in the retail business. We must understand our customers and learn to engage with them, we need to communicate with the retailer. The power has shifted and that is going to be a tremendous challenge for brand owners.”
He also alluded on the many ways in which the country has benefitted from the retail industry through the creation of new jobs, the provision of additional income to the Sstate through VAT and by facilitating changes in the landscape of many regions through the creation of chain stores. He elaborated that since there is a wide disparity between the number of students who sit for the GCE O/L and the GCE A/L, many of these students rely on the retail industry for employment opportunities.
In his words, “We have to develop this trade and create more employment opportunities ensure that the children who do OLs and ALs and those who cannot go to university locally or abroad, or those who don’t want to sit for CIM, CIMA or Chartered can be empowered.”
He then went on to say: “Another thing organised retail does for the country is the collection of VAT. It’s good for the economy. When it was introduced two years ago some of us thought it was the end of organised retail but the revenue department found an indirect way to collect more revenue through organised retail. Furthermore organised retail changes the landscape of towns beyond Colombo and beyond the Western Province. Wherever you go today you will find chain stores.”
Therefore the retail industry needs to be developed further in order to continue reaping these benefits and according to him, understanding the customer’s needs and catering to them will tremendously help organisations to accomplish this goal.
“Organised retail is here to stay. It’s not as some of us thought many years ago, that it was only for the Colombo people. You cannot make a business just serving a few people. That’s change.”
Pressing the accelerator
Nielsen MD Shaheen Cader speaking on ‘Winning in the trenches: Growing in a tough retail environment,’ said, that the top 10 companies in Sri Lanka have adopted intelligent strategies that have sustained their considerable growth amidst challenges in the environment that have persisted since the devaluation of the rupee in 2012.
According to him these top companies have had wide distribution growth, spent more on advertising and brand development, focused on strategic pricing and also engaged in habit of constant innovation, none of which has hampered their profit margin but rather enabled them to stay ahead of the curve.
He revealed these findings gathered from Nielsen data saying, “Most of the top companies have had strong distribution growth. They have gone into more retail outlets and at the same time they have been able to market their brands very well to the consumer increasing consumer demand. Also tracking advertising spend, as FMCG volumes declined the faster growing companies actually increased their share of spend. So they pressed the accelerator while the others pushed the brakes.”
He then went on to say, “If you look at price increases the top 10 were more sensitive to and, empathised with consumer and they left their price increases to a lower level.”
This did not mean that companies had to give up on their high end products with premium pricing as it was clear that the top 10 companies also specialised in products with premium pricing that were above the market average. According to Cader, as much as 19% of their revenue comes from premium brands.
It was therefore better for companies to cover themselves on all fronts by catering to all customers with varying spending capacities, engaging different strategies and attracting them through an array of differently priced products and brand. 
Also according to him, the top 10 companies share a common trend of constant innovation as he said, “The top 10 innovated far more. They have brought out 122 brands. We saw 122 new launches in one year and now they account for 8% of their revenue. So you see the need for innovation in the market place.”
According to Cader modern trade is also more prominent compared to traditional trade in countries with a high GDP. This can be seen in countries such as Malaysia and Singapore where modern trade dominates the retail markets. In Sri Lanka, about 15% of FMCG trade is comprised of modern trade with the remaining 85% being traditional trade or general trade such as groceries, chemists, cosmetics and so on.
He said, “In India there is far more general trade focus overall volumes. Thailand has 75% traditional trade and 25% modern trade. Problems that have occurred in Thailand in the recent times have caused modern trade to come down. Indonesia’s mini market is about half of their modern trade. 25% total FMCG trade is coming from the mini market franchise. In Malaysia and Singapore we see that modern trade dominates the market. As GDP increases beyond a certain threshold we see that modern trade sort of takes off.”
Shopping missions
Understanding the psychology behind consumerism can be taken advantage of, for more effective promotion of brands. Quantum Consumer Solutions Ltd. COO Roshani Fernando discussing the ‘Irrational Shopper’ followed the thought process of customers when making purchases. She presented this knowledge in a manner than can be applied by the retail managers when attracting customers to buy their product.
According to her a customer’s preference for a particular product is created by an unconscious thought process which can be intercepted to the retailers benefit. Giving the example of the instinctive reaction to run away from a snake before even analysing its markings she said that the shoppers thought process is similarly driven by instinct and emotion rather than through a detailed analysis of the merits of a particular brand. “Why is the shopper irrational? It is because there is a lot of our unconscious behaviour that drives us. Analysing the psychology behind consumerism we can see that many acts of shoppers are driven by instinct and emotions,” she said.
Understanding the mind of the customer and their various ‘shopping missions’ will then create new avenues for retailers to market products to customers. A deep analysis of the mind of the shoppers is an important task assigned to retail managers who must know how to intercept the shopper’s decision making process.
Many consumers arrive at shops with ‘shopping missions.’ They will have a shopping list of what they want to buy and, as she stated, “There are many situations when the category is essential but the customer is not fixed on the brand. This is a good opportunity for retailers to attract customers.”
At this point the retailers should be equipped to intercept the customers thought process through the likes of attractive packaging and special offers. “Understanding shopper behaviour is important when creating pack sizes,” according to Fernando, who went on to explain that this requires an understanding of not only what the customer needs but what quantity they may need it in as, there should be a fulfilment of the ‘grip-grab and go’ sizes when the customer needs a refill. “In such an instance they won’t buy a 2kg pack and if that is the only size you have made available you will lose that customer. This is why pack sizes are so important.”
Another way to make use of shopping missions is to place together related products such as conditioners with detergent powder so that a customer who is in the market for one item may then be drawn to also make a purchase of the second, related product. This will immediately increase the market for such complimentary products that were not previously included in the customers shopping mission.
She said: “Many Sri Lankans households do their shopping on a monthly basis. The housewife will plan what should be bought. She will also have a date when the shopping in done. What we need to understand is, do these shopping missions have a structure? What are the behaviour triggers there? Adjacent categories are something consumers will always indulge in.”
Another underappreciated customer category is the child shopper, as Fernando pointed out. “When a child picks something up and puts it in the basket the mother will be compelled to buy it.” Retailers fail to make use of this knowledge by stacking items such as dairy products in a way that it is out of reach for children.
The retail experience
What is really happening with technology in the retail space is that technology is helping realign the way people shop with the way they live according to MAS Bodyline, Director Innovation and Consumer Insight Irfan Ahmed who discussed some of the most notable trends that the technology revolution has brought into the retail industry in his presentation titled ‘bits & atoms’
As he pointed out, “At the end of the day we are creating the experience. Creating experiences is the end game for retail. Blur the lines between physical and digital. We are moving on from being the contextual self to the quantifiable self. Companies can track monitor measure everything we do and create quantifiable data about their customers.”
There are many trends that have taken over the retail industry as a result of this massive technology development.
Retails stores are also increasingly making use of in-store technology such as RFID (Radio Frequency Identification) that is available today to collect a wealth of information about on goings on the shop floor. Ahmed described the extent to which this technology is being used by modern savvy retailers to acquire a wealth of information that they can use to improve their store saying: “We can look at who is picking what t shirt, in what colour and in what size, providing information on what’s moving and what’s not. Customers can be tracked through the use of cellular coverage and Wi-Fi. By discovering where they are and where they standing the most, and spending the most time you can start playing around with the configuration in the store. Eye line tracking technology also gives details on the packaging where the consumer stares at the most. He added that surprisingly the price tag is the least looked at area in a product packaging and customers pay more attention to the colour and the brand.
Technology has also changed the way payment and transactions are being done in the retail industry. One notable example was the square reader – a credit card reader accepting payments on a Smartphone or iPad with no commitments, or long-term contracts. Card payments was a market that was largely dominated by banks which now had to adapt, and as Ahmed said, “Global trends hit us faster than we think. For instance in November 2012 the square reader was launched in America and disrupted the process of local banks a few months later.” 
Also taking over the retail industry to enhance the customer experience is augmented reality when the digital world crosses over to the real world. For example, Tesco used this technology to allow children in their stores to take pictures with iron man as incentive for completing a series of tasks. BMW also uses this technology to give customers a futuristic experience: “They give you a pair of goggles and if you stand in front of the car, the thing comes to life. Augmented reality is so advanced now that it’s also used a lot in hospitals and surgeons are now using it to do trials runs of the surgery before they operate.”
Furthermore speaking of social commerce and referring to ‘word of mouse’ which is a term for when customers themselves promote brands among their friends, Ahmed pointed out that retailers should use social media to reach out their customers and interact with them as endorsements by other customers can be far more valuable for building the brand image than traditional advertising. “We believe other consumers more than (advertising carried out by) the brands.”
Automation also allows companies to create a sustainable repeatable process inside marketing and sales by taking social data, mobile data and physical data and giving it actionable insights.
Better vantage point
Digital advertising provides more specific advertising opportunities and increases customer engagement compared to any other medium. Advertising has transitioned into digital modes of communication faster than previously anticipated.
This change is happening because people’s attention has shifted. The amount of time people spend with technology rather than interact with the outside world has shifted drastically in the recent years with more time being spent on mobile phones.
Mobile advertising has overtaken paper advertising. As Dialog Senior GM Digital Commerce and Advertising Sidath Chandrasena said: “This was predicted to happen in 2016 but the fact that it has taken place already indicates that change is taking place faster than what was anticipated.”
Unlike advertising in between TV shows when people tend to use that time to do other things, mobile phones create a better opportunity for companies to reach their consumers because it would rarely be ignored. 
Speaking on ‘Capturing the attention shift’ he also said: “There are already a lot of people with access to the internet and a lot of these users will be using mobile phones. 11.5% of the Sri Lankan population is already on Facebook and market penetration is no longer an issue. The language barrier has also not hindered this progress as the numbers clearly indicate to this fact.”
Digital advertising goes beyond even advertisements and banners on the internet. Using multi channels you can ensure that it reaches everybody. A multi channel strategy is suitable for Sri Lanka given its diversity in access.
TV has the largest penetration with 15.8 million users but advertising on this platform carries with it a significant cost of production and broadcasting needs to span over multiple channels to get the desired coverage. Radio also has a wide penetration of about one million and is still going strong. Advertisements carry a slightly lower production cost but broadcasting would still have to be done over a number of radio stations to reach the masses.
Newspapers at 9.6 million penetration is a fragmented number and would also require the use of multiple channels, but there is a reoccurring question of ROI.
Chandrasena said: “Therefore mobile advertising provides the widest reach from one vantage point. For instance, Dialog has 9.1 million subscribers and this number can be taken further to the other non Dialog users through signage and display advertisements. Also, target groups can be made based on age, sex and various interests for a more efficient campaign. Data analytical engines are being used to create customer profiles so along with coverage and we know that there is engagement. This also creates analytics as you know who interacts with your brand and you know which age groups and in what areas people had shown interest and, focus on those people who were most likely to purchase the product.”
According to him, traditional media will not disappear but rather there will be an inter play between the old and the new. “For instance adverts will provide codes that customers enter into the website to receive rewards. Digital advertising will eat into tradition media budgets.”
Also while organisations are reaping the benefits from such advanced data analytical tools he pointed out that the service providers should take steps to ensure that their customer’s experiences are not hindered by extensive mobile advertising. He informed that “Dialog has created a digital platform that allows the user to decide what advertisement he will be subjected to and to avoid the creation of negative goodwill and to avoid spamming our consumers.”
Mobile phone banking
Banking has changed rapidly with the development of technology as Commercial Bank Ceylon PLC COO S. Renganathan said, “The banking environment has changed from a time when the customers visit banks. Now the virtual bank takes banking to the customers.”
He described his past experiences observing the integration of technology into the banking sector throughout his career, illustrating how rapidly technology has taken over in his 30 years of experience in the industry. 
Speaking on ‘Retail banking landscape and the evolving customer service expectations,’ he outlined the aspects in which the changes to retail banking will take place in the future specifically, the key professions of the future retail banking, value drivers and the key focus areas.
“The economic focus will not only be on the financial stability but risk mitigation and compliance has also become more and more important for retail banking in the future,” he said, provided that profits were not the sole focus of key professions in retail banking.
According to Renganathan, mobile banking will be the trend heading into the future. “Inclusion strategy bridges the gap between social economy and digital knowledge divide. That is very important. Today we have more mobile phones than the population of this country so we need to bring in the non banking people into the banking community.”
Also speaking on enhancing the customer experience when banking he said that aspects such as one-stop-shop and ease of opening accounts are very important when attracting customers.
“We also need to focus on one-stop-shop. Customers want all their financial needs met at one place in one counter. You have got to think of new types of deposits and new ways in which you can reach the customers. We have gone into cashless – plastic cards and now we’re looking at card free banking with people making use of virtual banking trends. Penetration of mobile banking is much faster than internet banking. The reason mobile banking is catching up is its simplicity and the immediate transition which can be booked. The mobile wallet also allows you to carry out various banking operations such as utility banking. 72% of internet users are active on social media. Customers are increasingly expecting banks to create offers through social media.”
While technology is taking over, banks must taken caution not to leave behind a segment of their customers who may still prefer the traditional mode of banking as Renganathan stated, “However, virtual banks cannot replace the personalised service received in banks. You have to ensure that the traditional roots are maintained for the customer to have a seamless transition. Customers’ expectations have not changed. Service excellence is something we must always strive to accomplish but for this you need a really motivated staff.”
Igniting the magic
GSK Director Sales Kumar De Silva imparted knowledge on ‘Point of Purchase – Igniting the Shopper’s Mind, Heart and Wallet in the Retail Space’. He pointed out that the power had shifted from the retailers to the consumers: “Consumers may have had to settle for whatever products were made available by the retailer, today there is a well developed preference of brands as people arrive with separate shopping missions. They are looking at quality and various other demands and this is a challenge.”
De Silva also said: “85% of the trade is traditional trade, with Rs 400 billion turnover and 230,000 retailers in the country. Many of these traditional traders are independent while some have mixed portfolios catering to different needs. Today this traditional brand building model is being challenged because of the sheer amount of information that is going around. Therefore to achieve targets magic in different points is required.”
He described three types of shopping experiences for customers; when customers ask, customers select and ask or self select. The range of products in an ‘ask’ and ‘select and ask’ store will be minimal compared to the ‘self select’ stores that display a variety of products of the same brand for the consumer to chose from. Furthermore shops in which the customer asks the retailer for the products, the retailer has an opportunity to influence what the customer will purchase.
70% of retail purchases are decided at the point of purchase making it a vital point in the retail process and companies should have a strategic understanding of it to avoid missing business opportunities because it can be a very arbitrary process as previous speakers had alluded.
He added, “Retail space is becoming more and more expensive. Lifestyles changes brought on by micro and macro environmental shifts can affect the shopper’s habits. Furthermore memory can be very influential to the customer at a point of purchase.”
He further advised: “In the retail outlet you get a limited share and within that limited share you should be able to provide as many units so that all your products are getting displayed. Adapt pack sized according to the shopper’s habits, such as low utility packs for visible distribution. This is another way to optimise the brand offer.”
See the possibility
In the next five years, whatever is going to happen will take place in the India-China region which already contains a majority of the world’s population and as Unilever Head of Modern Trade Viranga Wickramaratne said speaking on ‘What to expect in 2020.’
The production of the world’s most influential brands will also be seen from this region. With the many lifestyle changes and life expectancy changes that are also to take grip in the future there will be many elderly people who will also need to be made the focus on in these markets. The family unit is also evolving and these are all changes that retail managers will have to take into account when promoting their brands in the future.
One major upcoming trend according to Wickramaratne is that women will be the target of growth and in 2020 women will be a driving force of the economy. “Their increasing spending capacity creates many opportunities that retail companies will miss out on many opportunities if they fail to take steps to accommodate these numbers.”
Furthermore, convenience will be vital to the shoppers of the future. Consumers are becoming increasingly less tolerant of standing in long queues to pay bills and this will no longer be an acceptable standard.
Blurring formats can also be seen taking place and will be more apparent in the future as “there is no longer a rule that banks cannot be found in supermarkets and supermarkets can be found in banks”.
According to Wickramaratne, traditional trade which is at about 85% of the market today will continue to dominate in the future, at about 60-75%. He also said personal relationships are done very well in the small shops with vendors being familiar with their customers and making them feel special. “This is what companies will try to do and will keep trying to improve.”
Furthermore, we will see stores remaining open for a longer period of time between 20-24 hours a day.
New technology such as Google glasses may also see customers shopping in the comfort of their own homes just as they would in a store with the aid of virtually projected images. While this may seem to be further into future he pointed out that the required technology has already been made available to the public and is gaining popularity in the Western world. “Someone might think that it’s not possible and they will lose out over someone who sees the possibility and acts accordingly.”
Furthermore, many people will enter stores expecting to be entertained and retailers need to equip themselves with the necessary tools to capture and engage their customers’ attention and create an enhanced shopping experience.
Wickramaratne said: “Have you thought about the retail experience rather than the sale? Do you have the ability to execute this? Have you spent time looking at data and looking at how the trends change from month to month and season to season? Modern retail channels are an experience themselves. People might not enter a store to buy anything. Are you ready to entertain your shoppers?”
