Teaming up for growth

Kishore Biyani on the sidelines of a CII Retail Summit stated that “The year 2009 will see more collaboration than ever — between fellow retailers, retailers and real estate developers, and in sourcing of goods and services.” Collaboration at various operations and between various stake-holders will hold the key to profitability in the sector, he stated. “We operate in a new world order, wherein collaboration with stakeholders is key to profitable business. Areas like marketing spends, real estate, recruitment and training, sourcing, back-end and advocacy offer scope for cooperation. Ideally, we should look at collaboration on common processes that provide no competitive advantage which would enable shaving off 5-8 per cent of costs.”

Successful collaborations are associated with multiple objectives. The more the different priorities can be successfully linked together, the more opportunities both parties will see for future collaboration. Areas of collaboration that have high potential in the Indian retail industry can include:

Assortment and category planning: Today, with consumers showing a greater orientation towards experimentation in their purchasing habits, most retailers are going forward with substantial increases in SKUs, private label volume, promotions, new products and localized assortment. As a result, retailers have to lower inventory to compete. Assortment planning should be associated with space planning, which also addresses retailer’s desire to lower handling cost.

Shelf-centric collaboration for assortment and category planning between manufacturer and retail is vital for efficient supply chain and assuring availability of right assortments. “Understanding such collaboration touch points will help retailers in developing a supply chain that matches replenishment and retail velocity across various stores to reflect changing consumer needs and requirements in specific catchments,” says Mohit Khattar, Chief Operating Officer, Natures Basket Ltd. Such collaborations will also ensure elimination of non-value-added inventory and remnants and therefore improve shelf availability.

When a retailer gets into collaboration with manufacturers they can also explore differentiated offerings, as an additional opportunity. “Future Axiom has entered into this partnership with Nokia to give an added advantage to all Nokia phone buyers by giving them an assured gift on every purchase of Rs.5,000 and onwards. We hope to bring many such exciting offers consistently as a reward of loyalty for our customers,” said Mr. Ashy Sehgal, CEO, Future Axiom.

Promotions: Recently, Gitanjali Jewels and Shoppers Stop came together for a promotional event called as Precious Moments where Morellato watches were gifted to Shopper Stop customers. In this way both Shoppers Stop and Gitanjali Group (retailer of Morellato watches in India) came together to create better offering for customers while at the same time promote Morellato watches to gain customer appeal in the Indian markets. Speaking on the occasion Mr. Rahul Vira, Business Head, Morellato said “We are extremely happy to be associated with Shoppers Stop. The Precious Moments offer has been an immense boost to our newly launched Morellato Time watches.”

New product introductions: The premium leather accessories brand Da Milano and London-based Pavers Foresight Smart Ventures (promoters of Pavers England footwear Brand) have recently introduced Staccato, the hi-end international fashion footwear brand for women, in India. Internationally too retailer-retailer collaborations are the norm. More recently H&M has unveiled its latest designer collaboration with luxury shoe brand Jimmy Choo to launch it’s first shoe designer collection.

Space Sharing: Today, an increasing number of retailers are combining their stores with a complimentary merchant. Retailers are pairing up today with a suitable use and sharing of the space and expenses. The phenomenon is often termed as co-branding. Food Service providers like QSRs are already using it to their advantage. A case in point is Devyani International, which owns the master franchise for Costa Coffee and Pizza hut has an outlet where both concepts co-habitat. Revenue-sharing arrangements between retailers and mall developers also show intentions of real estate owners to collaborate in creating a win-win objective.

New Product Development: There has been an ever-increasing change in the nature and composition of products and services offered at various retail formats of diverse players, with private label taking a bigger share. Future Brands Ltd, part of the Future Group, has already declared big plans for initiating private labels in the FMCG category like oral care, detergents and tea. “The objective for developing private labels for consumer products is to ensure qualitative products for our customers. These private labelling of FMCG products would also help in bringing more affordability for the end users,” said Atulit Saxena, Chief Operating Officer, Future Brands Limited. Future also has plans to sell private labels both from its own stores and also outside retail points.

Collaboration on the cross channel assortment: For multi-channel retailers, it makes immense sense to pool inventory across selling channels. The collaboration is a systematic approach to exploit the strengths of one channel to complement the relative weaknesses of other channels across areas of inventory, order management, fulfillment and customer processes and retailers that do it can harness greater customer satisfaction and loyalty.

The Devil in execution of retail collaborations: Mistrust remains a key obstacle to gaining more from collaborations. Some major inhibitors to improving collaboration are:

• Lack of integration in the supply chain
• Multiple/conflicting interests
• Too few resources from trading partners
•  Too few resources internally
•  Planning and forecasting are driven by financial objectives rather than actual demand
• Too many other priorities.

Creating a common agenda

If retailers create a common agenda, then it’s very easy for them to collaborate with each other and then retail tieups can be successful and lucrative. As Mr. Pradipta K Mohapatra of Business Coaching Foundation India Ltd. states, "Collaborative retail is what will take the retail industry to grow further.”