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Walmart -7 things the Middle Eastern retailers could learn.

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Walmart is driving Retail innovation.

Walmart is the world’s largest company by revenue—over US$500 billion, according to Fortune Global 500 list in 2018—as well as the largest private employer in the world with 2.3 million employees across 6,363 stores. It is a publicly-traded family-owned business, as the company is controlled by the Walton family.

If these credentials are not enough to open your eyes…

let me tell you 7 things that the Middle Eastern retailers and Mall owners/landlords could learn from Walmart.

1) Size does not matter

Being a huge organization with millions of employees’ does not deter Walmart to take swift actions which result in Innovation and brings out innovative approaches to their retail offerings.

2) Collaborative Approach: Delivering growth

The Walmart team looked around and asked what else do their customers need?

How can Walmart enhance Customer Delight?

How can they embrace new technology and channels of distribution (e-commerce) to enhance their customer’s experience?

Can they attract more footfalls into their hypermarkets or malls if they change?

The deep-diving into these questions gave Walmart a completely new dimension to their business.

 

The answer was “Give people a place to gather, share, be entertained and feel good about Walmart”.

 

The result is the birth of “Walmart Reimagined”. 

What is “Walmart Reimagined”?

Walmart Reimagined is a unique concept that follows the core principle of Walmart i.e. “Everyday low prices” i.e. finding cost-effective solutions to harsh realities.

Walmart innovated the utilization of their existing assets i.e. malls/shopping centers and its surrounding lands by converting their centers as town centers for the local communities.

The Town Center concept is part of an overarching strategy to bind Walmart deeper into the fabric of the nearly 5,000 U.S. communities it serves.

walmart
Walmart Re-imagined

 

3) Becoming part of the community

They converted the ample empty parking lots as a place for community Get-togethers, play areas, areas for community events, play areas for family and kids, including skate parks, and walking and biking paths.

In addition “mobility hubs” are planned for bike rental, bus, taxi, and ride-share services.

Healthy food is also planned with spaces for local farmers’ markets, food trucks, food halls, and food chains.

town centres
walmart re-imagined

4) Increasing focus on e-commerce

 Since the purchase of online shopping giant Jet last year, Walmart has acquired other digital retailers like Mod cloth, Shoe Buy, Bonobos, and most recently Flipkart in India.

learn more about the business model of food delivery apps, click here.

5) Innovation:

Apart from the Innovative concept “Walmart Reimagined”, the retailer further capitalized on e-commerce by building a proprietary app that matches online delivery addresses

with employees’ driving routes home. Employees are incentivized to deliver online orders on their back home.

The result, an online grocery delivery that rivals Amazon and Whole Foods from more than 900 stores.

Check the video of 50 years of innovation by Walmart

 

YouTube video

 

6) Using data analytics to drive Customer’s delight:

Analytical expertise is the name of the retail game.

Data, when combined with intelligent technology, helps organizations create connected experiences in a fragmented environment.

Wal-Mart is equipped with its own powerful architecture that collects, analyzes, and integrates data to create a personalized, full customer view.

 

Wal-Mart’s goal is to bridge the gap between what customers do in-store and online to establish one seamless experience.

 

learn about lipstick as an economic indicator, click here.

 

7)  Keep marketing simple

Get all messaging directly to the point and deliver accordingly.

The newly improved slogan says “Save Money. Live Better.” shoppers know that purchasing from them guarantees lower prices for better products.

 

is walmart a hypermarket?

 

Sam Walton once said while replying to a question from Press reporter:

“To succeed in this world, you have to change all the time.”

 

My personal learning from this quote, while change is never easy, those companies that adapt quickly have the best chance of survival.

I would like to end my article by asking the Middle Eastern Retail fraternity and Mall owners a simple question,

“Are you driving innovative growth to your existing projects/ malls/ shopping centers?”

If your answer is NO, (which I presume) then feel free to reach out to me for free advice.

 

References: Walmart Wikipedia, ICSC conference- Walmart keynotes, Business Insider & Forbes.

 

About the author:

Ritesh Mohan is a passionate retail professional with over 20 years in the Retail sector, handling some of the biggest brands in beauty, fashion, and fragrances retail & FMCG sector. Ritesh has been instrumental in the growth of some of the regional brands as well in the Middle East region. He specializes in Retail management, Product development, and Brand Management, Retail Operations, Sales Management and Franchising & Business Management. He strongly believes in empowering business owners with his wisdom & experience of around two decades in the industry.

digital receipts

How malls & retailers could benefit from digital receipts?

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The biggest challenge for any mall management today is to drive footfalls into their tenant’s shops and add value to their tenant’s business. The answer lies in digital receipts or e-receipts.

Digital receipts or E-receipts which is the bi-product of Big data or Artificial intelligence & Machine learning algorithms can offer some relief to mall’s dwindling footfalls and also help retailers to fight against the retail apocalypse phenomenon.

At a recently concluded retail conference in Dubai, the sentiment across the retail fraternity was how to sustain their operations and retail foot-prints without depleting their profit margins.

Interested to know the future of retail stores, click here.

Background:

Lets first all understand that retail is not dying but bad retail is certainly dying.

Brands which refuse to adapt themselves to changing consumer’s buying behavior would vanish.

According to the latest research, the most successful retailers are the ones focused on using technology to become better retailers — not just better innovators.

Being first is not important but being fast in your actions determines your success in new age economics.

The premise of Digital receipts or E-receipts:-

Personalized Communication:

Thirty-five percent of shoppers say they’re more likely to purchase from a retailer that sends personalized advertising, and 36% want more customized experiences. Source: Masters of the Top Four Retail Tech Trends

Your receipt or printed invoice hold the tremendous potential of data analytics and customer insights and this forms the key basis or premise of digital receipts.

Digital receipts can now power up your digital marketing program like never before.

How it works

At the most basic level, this is how digital receipts work at the point of purchase:

  • Upon checkout, the cashier normally handover the printed invoice to the customer or even asks if the customer would like a digital receipt or both.
  •  
  • If the customer chooses a digital receipt, then the cashier simply enters the customer’s email address or telephone number and the system delivers the receipt to the customer’s email inbox or on to phone using text message.
  •  
  • Data from the transaction (including the shopper’s email address, tel no) is captured in the digital receipt system, and all of that data can be used for current and future marketing programs.

 

Today digital receipts Technology uses advanced AI/ML and advance data analytics based product that helps retailers in-

  • Build next-generation CRM for customer segmentation and personalized engagement based on sales data.
  • Increase customer footfalls.
  • Increase revenue per basket size
  • Optimize and forecast inventory based on sales and external factors.

 

 

Why mall owners or retailers are not using technology?

 

 

Lack of IT know- how:

Malls & Retailers still spends in millions to get the software developed for their malls/ brands but they tend to forget or ignore the basic fundamentals of retail i.e. Increase your bottom line by making the existing consumer shop more within your mall.

This is where robust CRM systems and digital receipts come to play.

Human psychology:

We tend to find an easier way to do things, increasing customer footfalls in a mall is an easier route out for most marketers but that’s marketing Myopia of a digital age.

It’s always cheaper to sell or upsell to your existing customer rather than acquiring a new one.

Benefits of Digital receipts or E-receipts machine learning software:

  • Fast – In 30 minutes the complete system is up and running
  • Seamless – No deep CRM/API integration required
  • Works with any windows based billing software.
  • Secure sales transaction Data Capture
  • Enhanced brand value via enrichment and promotional messages on e-receipts.

 

YouTube video

 

Today’s Challenge:

The challenge for businesses lies in how to harness, make sense of, and use this information to generate some form of competitive advantage.

 

Any retailer or mall owner who wants to understand as to how they need to increase their footfalls without making a big hole in their pockets are most welcomed to contact me on riteshmohan@yahoo.com .

I would be more than glad to help my retail fraternity with my retail wisdom and retail fundamentals & would guide them to test the technology by using pilot testing programs. Feel free to reach out to me for any cutting edge solutions or ideas.

 

A case study of a brand using the power of AI and Machine learning:

 

Brand: Third love (lingerie online retailer)

This online retailer has built USD 750 Million business by exposing the weakness of Victoria’s secrets brand.

How do they do it?

ThirdLove’s big difference from the other start-ups, including True & Co. & Adore Me, is its use of voluminous amounts of data—600 million data points such as breast shape, cup fit and band tightness from over 11 million women that it has culled from an online questionnaire—to create better-fitting bras, especially by pioneering the use of half-sizes.

Thirdlove acquired Indi Custom, an app that made custom jeans by taking measurements, in 2013, even before launching the first product.

They tweaked Indi’s technology to focus on bra fit and created the ThirdLove app, which took two photos of users in their underwear or in form-fitting clothing to calculate body size and churn out a bra size recommendation.

The process is similar to that of high-tech makers of custom suits and 3-D-printed shoes work their magic i.e. using technology to predict the correct size.

Customer friendly approach:

For the cost of shipping, ThirdLove sends customers a bra they can take the tags off of and wear for 30 days. If a customer doesn’t like it, she can send it back for free.

Result:

Using technology & AI algorithms, Thirdlove brand is today valued at USD 750 million and still growing.

 

About the author:

Ritesh Mohan is a passionate retail professional with over 20 years in the Retail sector, handling some of the biggest brands in beauty, fashion and fragrances retail & FMCG sector. He has been instrumental in the growth of some of the regional brands as well in the Middle East region. He specializes in Retail management, Product development and Brand management, Retail Operations, Sales Management and Franchising & Business Management. He strongly believes in empowering business owners with his wisdom & experience of around two decades in the industry.

 

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future retail stores

Retail Stores of the future

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“We will see more disruption in the next 10 years of retail than we did in the previous 1,000.”— Doug Stephens, founder of Retail Prophet.

 

Millennials bring with them a greater level of tech-savviness, and different expectations than the generations before them.

This new breed of shopper is more connected to devices and data, more comfortable moving seamlessly across multiple media channels, and generally more informed than ever before.

Not to mention the Post-Millennials, who will just be coming of age in 2025 and bringing with them an even greater degree of tech and media sophistication.

Over the next 5 to 10 years retail stores and the complete retail experience will undergo a dramatic overhaul.

Interested to know about markdowns- a strategic planning tool, then click here.

Stores would be smaller, fewer but more impactful:

Gone are the days of the big-box retail concepts with endless aisles stacked to the ceiling with merchandise.

As retailers focus on creating shopper- and experience-centric stores, they will need to downsize the physical footprint of their stores and create environments that blend more seamlessly into the communities they serve.

Large retail chains will operate in a variety of formats:

For example, Carrefour the leading hypermarket now has a significant number of Carrefour market in the Middle Eastern region, a concept which is smaller, stripped-down version of the big box retailer, aimed at serving the needs of urban dwellers and communities. It is a great way to increase your sales per sqm by consolidating the fast-moving merchandise in a smaller format.

The rise of food trucks and pop up stores:

To cater to impulse needs, more and more non-traditional formats, such as pop-up stores or mobile retail trucks will also exist to make it easier for consumers to shop whenever and wherever they wish.

An Era of seamless shopping experiences:

Today’s consumers are empowered with information and have choice like never before (and that’s only going to rise over the next five to ten years), and they are increasingly comfortable navigating across channels when they shop, retailers need to create a seamless shopping experiences across all channels – in-store, online, mobile, and other media channels – to give their customers what they want.

According to a 2015 study, Omnichannel consumers have a 30% higher lifetime value than consumers who engage with only one channel.

Seamless & integrated payment systems would also play an important role.

Recently, in Cochin (India) saw an opening of a seamless store “watasale” which is in line with Amazon Go i.e. enter, shop, walk-out. There is no cashier and everything is seamlessly integrated using AI, cameras, complex algorithms, the payment is gets deducted automatically from your e-wallet.

Happy to see that “make in India” campaign is bringing innovation into the Indian retail scenario as well.

YouTube video

 

Technology-driven Data analytics:

Technologies and the data analytics they provide to retailers would enable retailers to better manage sales productivity on the merchandise floor, and optimize in-store product assortments.

With the advent of AI algorithms, intuitive analytics will also help retailers better meet the needs of shoppers.

By mining data collected both online and in-store to understand shopping patterns and predict future needs, retailers can improve pricing strategies, inventory control, customer service, and ultimately, their bottom line.

YouTube video

 

Reverse trend Online to Offline:

According to Google, 75% of shoppers are more likely to visit brick-and-mortar stores if they find helpful local retail information in online search results.

Although Millennials are forcing brands to engage with them differently — over social and digital channels versus in more traditional ways — connected shoppers are still making their way into, and making purchases in stores. This trend gives a lease of fresh air to retailers as they can hope to see “connected customer” coming to their stores for purchasing. Key takeout for retailers is to have the seamless experiential store for their demanding customers.

I would like to end my article by saying to my retail fraternity that this is a time for optimism.

The nature of retail is changing, sure, but the brands that are responsive to how people actually want to shop will soon win the next generation of consumers.

In case if any of my readers, want to develop a cutting-edge retail strategy for their brand then I would be more than glad to share my ideas acquired while practicing & closely following retail trends.

You can reach me on riteshmohan@yahoo.com.

References: KPMG report on retail trends, Vendhq, think Google research on online shopping trends.

About the author:

Ritesh Mohan is a passionate retail professional with over 20 years in the retail sector, handling some of the biggest brands in beauty, fashion and fragrances retail & FMCG sector. He has been instrumental in the growth of some of the regional brands as well in the Middle East region. He specializes in Retail management, Product development, Brand management, Retail Operations, Sales Management, Business Management & Empowering business owners with his wisdom & experience of around two decades in the industry.[/vc_column_text][/vc_column][/vc_row]

Autumn VM at Dubai mall

Visual Merchandising- A Tactical Tool in Retail management

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Visual Merchandising as we all know it as “silent salesman” in retail. My article is in continuation to my earlier blog on the Visual merchandising which got an overwhelming response from my followers and connections.

Check the link by clicking here

Importance of Visual merchandising cannot be ignored especially in turbulent times wherein the stores need customer footfalls in order to get sales and justify sales per sqm criteria.

In this article, I shall highlight the importance of storytelling concept using visual merchandising.

The foremost thing to remember is that people may not remember your advertising messages but they shall remember visuals if presented in a well-structured manner. That is the premise of Visual merchandising storytelling concept.

Narrate your story (concept) through color coding or blocks:

Contrasting colors help customers to take notice by drawing their eye to the display.

It’s not only bold colors that attract attention – a simple black and white display could generate customers’ interest.

color block

color blocking

Create Hot spots within the store

As per research study, hot spots can increase sales by 229%, retailers should pay attention to where the customer’s eye will be drawn to in their store.

Successful visual merchandising should lead your customer to the items you want them to take notice of. Make your products the central part of your Visual story.

hot spots in store
creating focal points or hot spots in the store.

hot spots in zara shop

Integrate your sensory powers

We all know that almighty has given us the power to see, taste and smell and hear. Try to integrate these sensory powers in your visual story to create a long-lasting impact on customers.

Smell is the first of our senses to develop in the evolutionary chain. 75% of our emotions are generated by what we smell.

Researches have shown a 40% improvement in our mood when we’re exposed to a pleasant fragrance. A lot of perfumeries worldwide opt for sampling their fragrances using incense burners in order to entice consumers into their stores and setting a mood for them to shop.

Music is another way to increase the power of your visual merchandising. Music helps to solidify the visuals of your brand and create the right atmosphere in your store.

Use your creativity in an art form

Visual merchandising using art as an art form to highlight the key products. This is most commonly seen in fashion boutiques and hi-end shops.

Visual merchandising is indeed an art form.

VM as art form

Grouping of products

Grouping products help the story-telling aspect of retail visual merchandising. Place products that complement each other to encourage cross-selling. For instance, a bag can be grouped with shoes, trousers and a top to show the customer what a complete outfit will look like.

Visual merchandising

Recently malls in the Middle East are following this trend wherein they accentuate the seasonal theme into story telling format highlighting the products of their participating tenants thus providing tenants much needed support to push up the sales.

Autumn VM at Dubai mall

These are some of the few Visual tricks to attract and engage the customers to your store.

To end my article I would like to summarize the whole role of merchandising in retail including Visual merchandising with a video.

Hope it would help you to narrate your retail story visually.

YouTube video

 

If any of my readers need any assistance from me in terms of sales conversion and giving their retail business a boost, I can be reached on riteshmohan@yahoo.com for one to one catch up. I shall be more than happy to help my retail fraternity with my retail wisdom of over 2 decades.

 

About the author:

Ritesh Mohan is a passionate retail professional with over 20 years in the retail sector, handling some of the biggest brands in beauty, fashion and fragrances retail & FMCG sector. He has been instrumental in the growth of some of the regional brands as well in the Middle East region. He specializes in Retail management, Product development, Brand management, Retail Operations, Sales Management, and Business Management & believes in empowering business owners with his wisdom & experience of around two decades in the industry.

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7 steps to do brainstorming

Discover 7 steps to conduct Brainstorming effectively.

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What is Brainstorming?

Brainstorming is a situation where a group of people meets to generate new ideas and solutions around a specific domain of interest by removing inhibitions.

People are able to think more freely and they suggest many spontaneous new ideas as possible. All the ideas are noted down and are not criticized and after brainstorming session the ideas are evaluated.

How to make Brainstorming more effective?

 

  1. There are no titles only brains: Always try to leave your titles outside the room while participating in a brainstorming session.

 

If you want unbiased opinions and views of the participants, drop or leave your designation outside.

2. The correct size of participants: 5 to 7 is the ideal number of participants in any brainstorming session. More the number, the meeting would end without any action steps or without any great idea. Use maximum post-it notes to write the ideas generated by participants. (paste it on walls or on the board)

3. Try to get unbiased, fresh perspective to a problem: that the core objective of any brainstorming session. Fill the room with people who are not from your trade or line of business. You shall get fresh point of views and perspectives to solve your core issues.

4. No pop-up quizzes: Set clear agenda prior to setting up the brainstorming session. You can offer the opt-out option in order to maintain the ideal participation. Give people the problem or issues prior to meeting.

Remember, problems are solved by sub-conscious mind.

5. Set the mood of the brainstorming session: Find some creative exercise or teamwork, bring-in an element of fun in the session.

6. Appreciate the person and the given Idea: Remember every idea is workable, so always give a big thumbs up when an idea is given and appreciate the person.

7. Always document or record the session so that you can re-live the moment wherein the spark of a great idea was born and use it to inspire the other team members.

 

When managed well, brainstorming can help you generate radical solutions to problems. It can also encourage people to commit to solutions because they have provided input and played a role in developing them.

Click here if you want to learn about Franchising

 About the author:

Ritesh Mohan is a passionate retail professional with over 19 years in the retail sector, handling some of the biggest brands in beauty, fashion and fragrances retail & FMCG sector. He has been instrumental in the growth of some of the regional brands as well in the Middle East region.

He specializes in Retail management, Product development, Brand management, Retail Operations, Sales Management, Business Management & Empowering business owners with his wisdom & experience of around two decades in the industry.[/vc_column_text][/vc_column][/vc_row]

Amul -Taste of India

Memorable advertisements from “Made in India” brands.

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“Made in India” a unique concept given by NDA led the government to promote the manufacturing sector in India and goods from India. But, is it a thought only limited to the manufacturing sector?

My article is my take on how some brands and their memorable advertising & marketing communication resonated “Made in India” in early 80’s and made these brands evergreen and cult from a brand positioning point of view.

These  Made in India brands captured the essence of real India back in the early 80’s and mastered the art of brand promise coupled with relevance.

Read my article on brands using social media effectively: click here

Brand Promise with Purpose:

 

Brand – AmulAmul- Made in India

The evergreen Amul girl character used so efficiently in advertising that it still remains

Fresh and relevant fulfilling the brand promise. A classic example of making a brand stay relevant and long-lived in consumer’s minds.

Brand Promise of the brand is Honesty, credibility built by offering the best products to its consumers.

 

A Brand that is owned by the milk producers of Gujarat is an example as to how an entrepreneurial spirit of farmers grows to become the world’s largest cooperative federation serving millions of consumers across the world.

Amul girl and it’s punchier & humor & catchy advertisements based on current affairs makes the brand stay relevant even in present times.

Hats off to wonderful creative team Amul creative campaigns.

Build Brand Promise with Humour:

Brand – Fevicol

Another classic example of how to keep brand alive for over 35 years, a brand owned by Pidilite Industries has created an empire with its brand “Fevicol”. Kudos to its advertising agency O&M India. I am a great admirer of Mr. Piyush Pandey and his work.

Brand Promise delivered i.e. a bond built to last forever.

Who can forget this commercial from Fevicol which is now a masterpiece in Indian advertising?

YouTube video

 

Conclusion:

The first principle of the Brand building is “Stay true to your DNA” i.e. promise you want your brand to make to its users.

Add to it a Purpose that you would like to develop in your customers.

Remember people don’t buy products or brands, they buy Stories…

In case any of my readers or connections want any guidance pertaining to brand management, Product lifecycle, communication strategies or digital initiatives. I would be more than happy to share my wisdom and knowledge with my retail fraternity members.

You can reach me on riteshmohan@yahoo.com

About the author:

Ritesh Mohan is a passionate retail professional with over 20 years in the Retail sector, handling some of the biggest brands in beauty, fashion and fragrances retail & FMCG sector. He has been instrumental in the growth of some of the regional brands as well in the Middle East region. He specializes in Retail management, Product development and Brand management, Retail Operations, Sales Management, and Franchising & Business Management. He strongly believes in empowering business owners with his wisdom & experience of around two decades in the industry.[/vc_column_text][/vc_column][/vc_row]

booming men's grooming sector

A new dimension In Beauty retail- Men’s Grooming

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Off lately, I have been observing an upswing trend in Men’s grooming category in the Middle Eastern beauty retail sector.  There has been an introduction of various men grooming brands (right from hypermarkets to gas stations). Brands like Beardo (Indian originated endorsed by Bollywood actor Suneil Shetty), the art of shaving, Biotherm for Homme (L’Oréal), Clinique for Men, Nivea men, Neutrogena -men; all have made their foray into the retail sector and are doing well.

So how big is the men’s grooming products market?

As my curiosity increased in deep diving this category, I researched and found some astonishing figures

According to TechSci Research, the men’s grooming market in MEA was worth USD 3.58 billion in 2016 and expected to touch USD 4.32 billion by 2022.

What is fueling this growth in Men’s Grooming category?

  1. Trends:

    Men’s grooming routines have moved far beyond just a quick shave. Today, many men have elaborate routines for making sure they look presentable, if not fashionable before they face their day. These consumers are buying more grooming products, and retailers that keep up with the current trends in beard care, hair care, and skincare can succeed in this growing category.

  2. Focus on styling & looks & taking care of “Me” psychology:

    The next generation of men is looking to brands and retailers to fulfill a need to express their personal style, including their grooming products and rituals. The inner need to make their presence felt & feel successful.

New Innovative channels of distribution:

 Today’s Millennials and Gen Z are internet savvy and have computing powers in their palms i.e. mobile phones. They know what to buy at a click of a button.

There has been an upsurge in the subscription model for men’s grooming products across (especially in the Indian subcontinent). Companies like Dollar shave club, Indian grooming club, The Tie bar, Birchbox, and Raw nature are all trying to woo the new age Men.

How are retailers adapting to this change in consumer trends?

International Retailers have responded to the growing demand for male grooming products with store designs matching men’s needs.

For example, some department stores have created dedicated sections for male grooming products. Macy’s opened a “men’s grooming zone” at its downtown Philadelphia store, featuring face wash, moisturizer, and other male skincare products.

Nordstrom made a similar move by relocating the men’s grooming counter inside the men’s furnishings area.

Kiehl’s, an upmarket skincare brand owned by L’Oréal, has a significant male customer base. According to the company, it estimates that 30% of its customers are men.

The brand has over 300 stand-alone shops in over 40 countries.

The Future Outlook for Men’s Grooming sector:

The region’s increasingly youthful population is also seen as a market opportunity as manufacturers look to target the young modern & fashion-conscious male. The region’s modern male is perceived to be more ambitious, better connected and networked, and has more spending power than ever before.

There is a huge opportunity for local manufacturers and companies to tap into the category either using their retail store formats or by the online channels.

You may also read my article on the digitization of Beauty retail here… click here

Case study: Dollar shave club

Dollar shave club leading Men's grooming sector
Men’s grooming subscription

Founded in 2011. It offers a monthly membership service for razor blades home delivery for a fee as little as $3 a month. It also offers other grooming categories such as post-shave moisturizer and hair styling products.

As the startup sells solely online, its marketing efforts are targeted at the internet-savvy millennials. They create content on social media which is authentic, direct and with a touch of humor.

In 2015, Unilever acquired it for whooping USD 1 billion, thus making it one of the Unicorns within Men’s grooming sector.

In case any of my readers want to know more about this category or innovative distribution channels then you know who your Go-to person is.

About the author:

Ritesh Mohan is a passionate retail professional with over 20 years in the Retail sector, handling some of the biggest brands in beauty, fashion and fragrances retail & FMCG sector. Ritesh has been instrumental in the growth of some of the regional brands as well in the Middle East region. He specializes in Retail management, Product development, and Brand Management, Retail Operations, Sales Management, and Franchising & Business Management. He strongly believes in empowering business owners with his wisdom & experience of around two decades in the industry.

How to build a robust franchise model_

How to build a robust franchise model?

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This article is a continuation to my previous article on franchise model wherein I gave few tips in form of questions that every franchisee and franchisor need to ask prior to moving ahead with their franchising plans.

Click & Read my previous article here: http://localhost/ritesh/2018/09/09/franchising/

I was overwhelmed by the response from my connections & few of them wrote to me asking me to clarify and write another article highlighting the model in terms of margins. My article is my attempt to answer these queries pertaining to margin structure.

The most critical element for any franchise manager is to play a balancing act between both franchisor and franchisee. He/ she has to think like an entrepreneur all the time taking care of both franchisors & franchisee’s interests.

Franchising model encompasses & provides independence to the franchisee to run & operate his business but at the same time provides protocols & systems that comes by having brand affiliations or along with franchise agreements.

It is the main KPI (key performance indicator) for any franchise manager to manage interests & expectations of both parties so that the model becomes profitable.

 How to play a balancing act?

Franchise managers need to spend their efforts on creating systems and process flows:

  • Robust franchise agreements
  • Detailed training manuals and its implementation with internal audit checks.
  • Comprehensive operating manuals, guidelines, brand guidelines etc.
  • Strong policies and procedures – try using automated tools here in case you have merchandise/products to handle.

 

From my practical experience of franchising fashion apparels and beauty brands, it is advisable to ensure that your franchise partner uses your Point Of Sales systems so that you can monitor his sales and stock levels closely and implement PUSH merchandise replenishment strategy from time to time.

It would result in faster replenishments and stock rotations thus resulting in more sales and faster break even for the franchisees.

Types of franchise models:

There are multiple ways of creating franchise models & put to test. Most common practices are:

  1. Collection of franchise fees for territory allocation (master franchisee) on sign up and then X amount per location added in that territory, coupled with royalty i.e. % of sales on per annum basis.
  2. Some franchisors work on X% of your gross profits.
  3. Some franchisors sell their products to the franchisee on % discount and advise them on their selling retail prices, thus ensuring that product is sold at uniform base pricing globally.
  4. Some franchisors help franchisee build their first store by providing them with shop fittings and furniture at subsidized rates and with longer pay-back periods.

 

Basically, there are multiple ways you can make your franchise model customized and suited to your requirements.

Foremost point to remember, “Always think from franchisee’s perspective and ask yourself, will you buy this franchise yourself with these commercials?”. If the answer is yes, then you are on right track.

Profitability varies from business to business, and industry to industry. How well a business is managed by the owner will have a significant impact on how profitable it ultimately is.

I’ve seen 1 million dirhams businesses that don’t generate any profits – or worse, are losing money.

I’ve also seen smaller businesses that generate only Dhs100,000 to Dhs 200,000 in gross sales, yet turn a net profit of 40 percent.

The key is to not let big top line numbers blur your judgment. The bottom line of a business is much more important.

Work out your COGS (cost of goods sold) ratio or % so that it gives enough space to your franchisee to sell and make some decent net profit post incurring all the expenses (rent, salaries, equipment, taxes, depreciation, operating costs etc).

Remember: Your franchisee’s success would determine your success as a franchisor.

 

 

Case study: Wow momo by Sagar daryani

This video would give you some inspiration to start up your business and for your information, wow momo is one of the fastest growing franchise in India.

 

YouTube video

 

About the author:

Ritesh Mohan is a passionate retail professional with over 20 years in the Retail sector, handling some of the biggest brands in beauty, fashion and fragrances retail & FMCG sector. He has been instrumental in the growth of some of the regional brands as well in the Middle East region.

He specializes in Retail management, Product development, and Brand Management, Retail Operations, Sales Management, and Franchising & Business Management. He strongly believes in empowering business owners with his wisdom & experience of around two decades in the industry.[/vc_column_text][/vc_column][/vc_row]

franchising

Franchising – Is it too hot to handle?

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Recently, I met with one of my linkedin connections and we ended up in discussing franchise management & franchising. As this is one topic that I am very passionate about and had a privilege of working under both franchisor and franchisee in the past. I would dedicate this article to my mentors/ bosses who gave me the opportunity to learn about franchising in a more practical way rather than a theoretical manner.

What is franchising?

Franchising is a business relationship in which the franchisor (the owner of the business providing the product or service) assigns to independent people (the franchisees) the right to market and distribute the franchisor’s goods or service and to use the business name for a fixed period of time.

“Franchising works by combining the drive and energy of the entrepreneur with the experience and expertise of the franchisor.”

 

Benefits of franchising for entrepreneurs?

  • Be your own boss.
  • Tested business model
  • Training & Marketing support
  • Support in site/location selection
  • Networking with peers/partners in other territories to learn from their experiences.
  • The cost advantage of bulk purchasing by the franchisor and the cost benefits are usually passed onto the franchisees.
  • Pride of ownership of franchised brand in an exclusive territory.

 

You may also check out my article on entrepreneurship here:http://localhost/ritesh/2018/08/06/start-a-business-not-a-startup/

 

So why do franchise system fail to deliver?

The main reason for the system to break down is lack of managing expectations both from franchisor’s & franchisee’s side. This happens when the franchisor starts seeing franchising as the fastest way to grow their riches. They are interested in signing of new franchisees and get their annual fees in return. They fail to understand that it is the success of their franchisees that will make their mother brand succeed in new territory. “Take care of your franchisees and they shall in return take care of your business and your brand in their territories” is one of the mantras for the success of the franchise system.

 

Few questions need to be asked prior to taking any brand on franchising:

  1. Can you make money with this franchise? What are your COGS? Royalty or fees payback period? Is the franchisor ready to provide initial capex support?
  2. Is the franchisor making money/ where is the money coming from? Do they have a good network of financial partners/investors/ banking institutions?
  3. Does the franchisor understand franchising?
  4. Are other franchisees happy with their investments?

 

Word of caution for franchisees:

  • Do your due diligence: Never get carried away by big promises made by franchisors, ensure you understand all the finer details in a franchise agreement or hire a professional legal advisor to review all the agreements. Ask for franchisors income statements as you need to ensure that your franchisor’s financial health is sound enough to ensure steady supply chain of goods and services to your newly formed franchised business.

 

  • Many people mistakenly believe a franchise, although higher cost, is a lower risk option – but it is not. When the franchisor is asking for 7% of turnover per month for license fees and up to 3% of turnover per month for a marketing fund, the franchisee has a lot of work to do before they break even. Not to mention the cost of borrowing to buy the franchise and ongoing fixed cost base.

 

  • Pricing is a common issue in the startup of a franchise. Finding the price point between cost and profit is a must to be successful. Every business needs to fill a gap in a market with its product or service hence every franchisee need to do research as to how much his customers would be willing to pay for availing a product or service from the franchised brand. Most of the times, franchisor fail in reading this aspect of the market as they tend to evaluate multiple territories with their own base territory pricing which may or may not hold true. The best way is to use the Big Mac index while devising pricing in multiple territories.

 

To sum up, not all business models will be successful, nor all franchise models would ensure your success. Hence prior to deciding to franchise your business or to purchasing an existing franchise, make sure to evaluate both pros and cons.

I have tried my best to provide an initial checklist for both franchisor and franchisee which they can follow in order to make their business successful.

In case any of my connections or fraternity member wants to know more about franchising or want insights to develop their franchise infrastructure then, you already know who your “Go-to” person is. I can be reached on riteshmohan@yahoo.com for any queries.

About the author:

Ritesh Mohan is a passionate retail professional with over 20 years in the Retail sector, handling some of the biggest brands in beauty, fashion and fragrances retail & FMCG sector. He has been instrumental in the growth of some of the regional brands as well in the Middle East region. He specializes in Retail management, Product development and Brand management, Retail Operations, Sales Management, and Franchising & Business Management. He strongly believes in empowering business owners with his wisdom & experience of around two decades in the industry.[/vc_column_text][/vc_column][/vc_row]

illustration on omni-channel

Will Retail brands need malls or shopping centers in future? Can some brands create disruption in retail sector?

2

Being in the retail sector for over 20 years now (14 years in the Middle East region) and post witnessing retail apocalypse wherein some major brands are either closing or filing for bankruptcy. I always wondered, whether there can be some disruptive technology which can offset and redefine the retail sector completely.

Post researching and reading on disruptive technologies, I am penning my thoughts on this article and can confidently say that there are some brands which are already using disruptive strategy for their benefits in retail sector and they have broken the conventional & traditional rules that retail selling can only be done either in 4 walls (brick & mortar stores) or on e-commerce.

Today, technology is enabling new retail startups to overcome the high cost of brand’s entry into a shopping center which is plagued by high rentals, high fit-outs costs, low mall footfalls, inventory overheads etc.

I shall be giving a few case studies to prove my thought and rationale.

Firstly let’s understand as to what are the current problems which are plaguing the retail sector: (My observations are based on my practical experience and interaction with many retail professionals)

  1. High rental costs for sustaining or running a store (costs would be higher in terms of malls or shopping centers)
  2. High manpower costs, inventory costs & other costs which inflates the overall costs.
  3. Economic slowdown wherein majority of buyers have become discount seekers, they only enter the mall or store when they see some offer of sale banners. (Retailers and brands are to be blamed to some extent for this cause).
  4. High inventory aging and low inventory turnaround.
  5. Declining bottom line margins (since goods are only moving on discounts or low pricing).
  6. Lack of retail talent in the sector, most of the retail organizations are being run by finance professionals. (They lack creative ability to see beyond numbers and P&L statements. Thank God, great companies like Google, Apple, Amazon, Basecamp are not run by finance professionals.) Disclaimer: I have nothing against finance principles, in fact, it forms the core of a business but numbers & excel sheets narrow down your creative visualization that is the need of the hour at the moment for the retail sector.

 

How do we bring disruptive technology in the retail sector?

Brands have to ask few questions to themselves:

  1. Should I sell my brand in my store or can I explore selling in someone else’s store (create distribution spread)?
  2. Can I reduce the store size and cut down on the rental costs?
  3. How much inventory should a store have and how should that be balanced with inventory online in a way that’s appropriate for every product and brand?

The solution to the above questions, I have explained below with the help of case studies:

Key Action point: Restart your brand promise with CUSTOMER DELIGHT.

Look at all activities that would add delight to all the customers who would enter the store.

There are retailers in the US who are increasing customer delight by using drop shipping methods. Platforms like Revcascade are creating disruption in the way we do our merchandise planning, inventory forecasting.

Gone are the days wherein you needed huge warehouses to store inventories and sit wondering every quarter as to what to do with the ageing inventory or out of season inventory. The financial solution is only Markdowns, end of season sales, promotions etc, all these make your gross margins lower.

  • Case study: Revcascade

RevCascade facilitates drop shipments from wholesalers to consumers. What that means is — let’s say you go to a store and they don’t have what you want. A sales associate shows you a tablet or screen that displays what you’re looking for.  It appears to be the store’s inventory at another location but it’s really the inventory of the store’s wholesale supplier. You can buy it on the screen and the wholesaler ships it directly to you at your home. You never know you bought something from the store’s wholesale supplier, you think you bought it from the inventory of the store at another location.

You may think that’s not such a big innovation. But financially it makes sense, you don’t block or order huge inventories in the first place, you save cost there itself. You enter an agreement with your vendor that the produced goods would be shipped from the vendor’s warehouse and hence you save on warehousing costs.

The most important thing Revcascade is delivering is Customer delight. RevCascade is turning visitors who didn’t find what they want into happy customers and that’s good for everyone.

  • Case study: Bonobos

The brand Bonobos decided that their stores don’t have to be 5,000 square feet in a mall, they can be 1,000 square feet. They cut their costs by genius stroke, Bonobos the men’s brand that lets you try on clothes in the store but doesn’t have any inventory to sell; anything you buy gets shipped to you from their warehouse after purchase. Most of the times it gets drop shipped from their vendor’s warehouse and you won’t even make out the difference, that’s the beauty of seamless technology.

  • Case study: Brideside

Brideside sells dresses for bridesmaids. Unlike most retailers that invest in real estate leases, Brideside invests in stylists, who give personal advice to brides and bridesmaids. You may say that’s just like Stitch Fix or other personal styling sites. But it isn’t, Brideside organizes its services around physical spaces where brides and bridesmaids get together with their stylist, often as a group, in person or virtually, to decide which dresses complement the big event. Most common places, it’s the home of the bride or one of the bridesmaids where they organize a try-on event with sample dresses and guidance from Brideside.

It’s a unique model that leverages physical space and virtual styling. The stylists help the brides and bridesmaids. Eliminates the need for expanding physical store in different geographies. You may be well off with a couple of flagship stores as you are bringing your merchandise selection right at your customer’s doorstep.

  • Case study: Bluestone.com (Indian e-commerce site for Jewellery shopping)

Bluestone.com gives a customer delight to their customers by making available their handpicked Jewellery styles in your home. You can try all the varieties in the comfort of your home and also take advantage of personal stylist who would guide you in your selection. Watch out the video.

YouTube video

 

I would end my article with the famous words that when the things get tough, it is the tough who gets going.. Challenging times are the best teachers that help us to re-invent ourselves.

Brands who are willing to re-invent themselves, you know by now, who is your GO-TO person. You may reach out to me on riteshmohan@yahoo.com

About the author:

Ritesh Mohan is a passionate retail professional with over 20 years in the Retail sector, handling some of the biggest brands in beauty, fashion and fragrances retail & FMCG sector. He has been instrumental in the growth of some of the regional brands as well in the Middle East region. He specializes in Retail management, Product development and Brand management, Retail Operations, Sales Management and Franchising & Business Management. He strongly believes in empowering business owners with his wisdom & experience of around two decades in the industry.[/vc_column_text][/vc_column][/vc_row]

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