Case Study

Case Study

SUMIT Morro watched as his advisor Arun Kar loaded a cassette into the VCR. Arun was the consultant the Morro Group had hired to audit the performance of Galaxy, Sumit's six-month-old superstore in Mumbai. Arun clicked the button on the remote and said: "Okay, watch this." The video clip showed a young man walk into Galaxy. He heads straight for the toys section, does not browse much, finds the action figures shelf, picks out a Spiderman web shooter, briefly glances at the adjoining carton - 'Spiderman gear' - gives it a miss, and leaves the section. "That was six minutes," said Arun, as the man walked towards the cash counter. But, on the way, he pauses at the hair care section, browses awhile, ("That was nine minutes," said Arun) looks around, ("He is looking for sales assistance, but can't find any") then again makes his way towards the cash counter. He pauses, turns into the men's section, spends 22 minutes and buys four shirts. "So, by now, he has been in the store some 45 minutes and his bill so far is Rs 4,800,"said Arun. The shirt section opened into the stationery department from where the man buys a few computer supplies, before he finally hits the cash counter. "Now notice," said Arun, "each time he is stuffing the invoice into his pocket."

At the cash counter, the man stood in the queue for seven minutes, paid and left. The video camera followed him as he walked into the car park. It showed him fumbling in his pockets for the car keys and out came a piece of paper. The man turned quickly back to the store. Sumit watched as the man went up to the cash counter; he had forgotten to hand in his stationery bill and was now requesting the lady to accept the payment. But she shook her head and asked him to join the queue. The man shrugged, crumpled the unpaid bill and left the store.

"This is your real shopper. He came to buy a toy and bought 6-8 times as much, just by walking past sections that spoke to him. Good layout? Yes. But your sales staff could not spot him and increase that 8 to 10; for example, he may have bought that Spiderman gear had there been an alert attendant watching. No one was tracking his purchases to make sure he was including all of them in the final billing. No one remembered him when he returned to pay and collect for the missed bill."

"But these are ordinary shopping hazards," said Sumit. "How can we help a shopper remember what he is buying?"

"I will tell you a story," said Arun. "Yesterday, my wife and I were at Arnarsons on Breach Candy. Alka wanted to buy small gifts to take with her to the US. When we entered, our intention  was not pasted on our faces. But see what happened. The small gift items are at the counter that you see as soon as you enter the shop. Alka picked eight pieces. Then she moved to the stationery section and bought some stuff. 1\\70 minutes later, I realised I had not picked up my bill from there. Suddenly this man comes up to me and says: 'Don't worry. I have your bills. You see what you want to buy. ram taking care.' What struck me was that he had homed in on the fact that 'this is my real shopper' and 'this shopper has multiple needs'. He gleaned that by sheer experience. We bought stuff from seven departments and this man did not come in our way and remained as unobtrusive as ever. At the cash counter, he submitted all our bills; I paid and then he matched my bills with my bags!

"This is one shop that has evolved gracefully over time. Alka says they have not changed their best practices with time or success. These are the little things that ensure success or failure. And these are the events that build the store's equity in a consumer's mind. It does not happen by chance, but by design and determination. This is what customer service is."

SUMIT nodded. In his mannerisms, Arun saw traces of his father, Vittal Morro. But the similarities painfully extended to mindsets too. Group chairman Vittal Morro had contributed to India's development with his infrastructure businesses in steel and fertilisers. The Morro Group had entered retail a year ago with a huge store, Galaxy. But for all its gloss, Arun realised that the old manufacturing mindset prevailed. At 32, Sumit, the younger and academically-accomplished Morro, had told Arun about his plans to expand the Galaxy chain into other metros. But Arun said he must wait for a year and invest this time in fine-tuning his understanding of retailing.

"This business cannot wait for a week!" said Sumit. "Others are moving at a faster pace!" Arun said: '~d bypass developing the most critical ingredient, the mindset? You have money, property and people, but not the mindset. Today, when I interviewed some of your key managers for performance information, what do I hear? 'Inventory is x%, sales is y%, costs z%.' They showed me reams of data that calculated asset bases, profits before tax, pending order status, even absenteeism. If you didn't tell me Galaxy is a huge store, after looking at their data, I would think they were talking about Morro Steel Works!

“All this data is helpful. But none of this reveals whether Galaxy is meeting the consumer's needs and the value he seeks from a store! Let me take you through some of the notes I made on Friday. One, the inventory with Galaxy is 25 days' stock which is equal to service goals stated in the manual. That's data. The information you need is, where is this stock? Is it available to consumers? Is it in the godown? How does this stock level help you if it is not accessible for consumption at the point of purchase decision when a visitor can convert to a buyer?

"Two, the number of buyers last Friday was 375. That's data. The information we need is, did they buy only what they came for or more? Again, how many walked into the store that day? Answers to that were approximations between 600 and 1,000. Let's say 600. So 225 left without buying. We need information on how many of these came looking for something, did not find it, or did not find sales help and left? We need to know this number, and whether the sales attendant engaged them adequately in the sales process, or did he lack product knowledge?

"I am saying how much do you 'know' that cannot be measured by numbers? Simply put, do you know how many people walked into your store today between 10 a.m. and 2 p.m.? But you are here, getting non-stop data flows on average bill value, total invoices cut so far, even comparison against last week and a rival store. Your data management is skewed to profitability by department, by category, by day, by week, but you have no idea about the fundamental data on which everything else depends, such as how many people walked into your store.

"I asked your floor manager Nakul Vaidya how many of those who walked in bought anything and he said: 'Nearly all.' Does that mean anything? Galaxy needs to convert every walk-in into a buyer. There is. to use your old manufacturing language, an investment that has gone in, which is why there were visitors to start with. But do you know if that investment paid off or returned something? You have a marketing plan. advertising plan. radio promotion plan - all this is very good but the conversion of visitors into buyers is the job of your merchandise and your store sales staffl What is the point then of measuring asset base and reorder levels?

"Forget that. Those are good for huge lead time operations like manufacturing. But retailing is from minute to minute. It depends on your shop assistants and merchandise. Did those work? What you make with what you have in the store is your conversion rate. It is both 'visitor converted into buyer' and 'buyer of Spiderman web shooter converted into buyer of Spiderman gear' also. What's the point of paying attention to reorder levels when the real operations are happening in the store? It's like a one-day cricket match; you look at the run rate per over, per ball, and not the batsman's past series performance!"

What pained Arun was this manufacturing hangover that old manufacturing companies held on to after entering the service sector. Manufacturing was one business where performance indicators were contained and measured in the backrooms - stores, god owns, cash boxes and general ledgers. But retailing was a business where performance was contained in the four walls of the store. In the hearts and attitudes of the staff, in the merchandise and how it was displayed. He said: “Among all that they gave me, there was no data of time spent by shoppers in a department. Studying the length of shopping time is critical. Browsers spend less time than those who have an intention of buying. In the early stages, you need to watch for these patterns and behaviours. That is what I am auditing, but your staff does not appear to believe these are critical.

"There is a correlation between time spent by a shopper in a store and the value of purchases. And a lot of the conversion will depend on the interaction between the shopper and the sales staff. That time must be increased - but to know by how much, I first need to know how much time a shopper usually spends. Else, how will you know if shoppers were disappointed or were unable to decide or unable to find what they wanted?

"Sumit, your employees in Galaxy were 'not working' for you. Or for the shopper. Selling is not about cutting invoices. It is about identifying a shopper, then converting desire into need and then into want. And finally into purchases."

Sumit locked very confused. His staff consisted of 'professionals', he said, some even lured from other well-established stores. "Forgive me, if this sounds abrupt," said Arun, "before you worry about your staff, you need to change your mindset. Reformat your approach and thinking on this business. Get out of the manufacturing orientation. From the way you observe performance while sitting in your office to the reports you ask for and commend, you are a manufacturer at heart. A steel magnate. To think retail is to think individual. Yes, Galaxy is running, people are walking in and most people are enjoying it. It's six months now and it is time to do a check on your mindset.

"First of all, this is Galaxy, not Morro Steel. You have to consciously delink and tune in to retailing with a completely different mindset. Earlier in your fertiliser or steel business, your buyers consisted of 40-50 dealers or distributors. In Galaxy, it is 1,000 or 4,000 people. Your revenue is not happening on Dalal Street, but with the consumer. In a way, you can say your revenue is sitting in the shopper's pocket and you have to get your merchandise and staff to work at getting him to part with it.

"The consumer is visiting your store to acquire a certain value. It means a lot of things. It may not mean actual purchase. It could well be an investment of his or her time to establish I whether he wants to come to your store again. That means the 'value' he is looking for is 'available'. That 'value' lies in your merchandise, your layout, your attitude and your employees. So every item in your store must come packaged in value for that will determine the shopper's buying experience and the 'value' he takes back with him.

"Manufacturing is a quantifiable business. You look at production, lead times, inventory - all measurable numbers. But these softer issues in service are not quantifiable - they are experiential. For example, if a customer walks past a shirts section, when it is right next to the trousers section where he bought something, how do you measure why he did not enter the shirts section? Your retail consultant may have the answer, but you did not create systems for plotting such information or interpreting it. Maybe you don't even see this as a parameter worth tracking! Tracking behaviour is a fundamental part of the service industry, but it is an intangible! Critically speaking, it is not even 'rewarding'. Say, for example, the lighting in a department needs to be taken care of because it is casting shadows and, hence, not attracting customers. So you do the needful. People start coming in, but you do not know if that is because the lighting is better or because the sales lady has also changed.

"But a well-heeled retailer like Ram Chander Kishan Chander Sariwala will know. That in the Banarasi section he needs yellow light, come what may. Because he has 'developed' his feel and the store from scratch, watching and building on customer reactions, no matter how trivial. But when a manufacturing business enters retailing right at the top, without going through the experiential learning curve, consultants tell him: 'These are best practices; these are proven; these are your operating manuals;...' Then we do the audit and find performance is just 10% of expectations. Why? Because he simply does not appreciate that the 90% he has neglected consists of the softer intangibles which, ultimately, make the difference.

FOR example, the first thing these manuals demand that you measure is loyalty: how many people walked into the store, how many bought, what is the average transaction value. Measuring it is not simple. When a family of three walks in, is it one footfall or three footfalls? The manual explains this. Today, at the end of six months, I ask about footfall and they say: 'Some hundred people come in everyday.' Do you know the variations that could have occurred over weekends? No. For them, 100 during the week is the same as 400 over the weekend! But had you gone by the manual, wouldn't you have known that over the weekend, you need to carry higher stocks? Do you know there could be possibilities to add on new products or ideas?

"Then again, in manufacturing, you can and did say 'no' to many customers, be it on payment, or early delivery or discounts. But in retailing, 'no' is a bad word. Even if you do not give discounts, you don't say 'no'; you say: 'It depends from season to season.' Now that could make a difference to five customers and not to 75. But this is a game of multiples. You are dealing with all kinds of people and many people. The multiplier effect is tremendous. But you go to a store and the manager simply shakes his head and says: 'Sorry we don't have dungarees.' It does not ring a bell that a consumer came expecting to find dungarees. All because the manager is busy looking at his sales figures, at his inventory. He1s correlating his performance with what he thinks is required. But experienced stores are working on what we call 'dwell time' or how long a shopper stays in the store. A person has four hours a week to spare. Either he spends it shopping, or seeing a movie or eating. Now I ! want to grab his time. So once he comes here, I won't let him go. Increase his dwell time. The longer a customer stays in a store, the more he buys. And it is the Ram Chander Kishan Chander kind of stores that have honed these skills."Sumit knew it was going to be a long haul. He asked: "How can we develop this fine- tuning? We are in direct selling, which is so people-oriented. It is a demand-pull business, where even if the consumer is not king, the seller can never be king. So what is the mindset that is required? Delight the customer?"

"It requires a humble mindset," said Arun, much to Sumit's astonishment. "Forget jargon like 'delight-the consumer'; it has a nice ring to it, I agree. But the ring can be actually heard when you put it into every detail of your service, where you say: 'I want you to be happy shopping here, after you leave this store, and even when you are unpacking your shopping bag. Even the price labels will peel off.' Labels? Do you know, the simplest way to peel it off is to run a warm hair dryer over the label? The one man who takes the pain to tell you this is Suvarna in Chennai. A huge Rs 200-crore per annum retailer, he tells you something as small as this. Because he realises that a stainless steel buyer does not want a single scratch on it. He thought about it, right?

"Thinking of the detail on behalf of a consumer is humility. But how do we transmute this humility to your staff? The biggest issue with India is social conditioning. Will Sumit sit behind a cash counter? Investing time in a consumer is critical. Being able to see life from his viewpoint is important. Being able to hear his complaints and feel his joy is also essential. Knowing that if your consumer does not walk into your store, you don't sell. And if you sell, then you owe it to him for having walked in and chosen your merchandise. That is humility.

LET me explain. A business house started retailing home accessories. A lady bought a steel toothbrush holder. Within two weeks, it developed rust. The next time she was at the store, she told the store manager. His response: "Aisa to ho hi nahi sakta! We have never received any such complaints." The lady who had just shopped worth Rs 6,700, put all her purchases on the table and left without paying. The consumer is evolving, but customer service is not.

"We always tell our clients: 'Think for a second before you respond to a consumer.' Now, we can put that into our manuals, but this is one experiential issue which you don't appreciate unless you do not internalise. The retailing God lies in the details. This is a very exacting business. It is a completely different ballgame when compared to manufacturing. And to know the detail, you have to be in it - out there where the detail is acting out every moment among shoppers and browsers!

"I am saying this is all owner-driven. You need to redefine your performance indicators and control areas for the retail business. Initially, every business grows. It's when you try to replicate the success into a ripple, that the true test of the internalisation of the issues faces you. Are you prepared for that? And if you have not done all those in the first few weeks, if you haven't monitored the critical attitude of watching patterns, you start on a wrong foot, creating a ripple for further erroneous conclusions that are based on poor understanding.

"It's not one product that you are manufacturing like before. It's not one product you are selling. You are selling goods you did not manufacture, you are selling to thousands of individuals, each with distinct buying behaviours, likes and dislikes. And there is no promise to come back for more. It's so dynamic! That is a mindset which comes only from experience and that experience will be valuable if you have put a discipline in place, a discipline that comes from wanting to understand every nuance of this business, from admitting that every moment is going to be a learning process, from admitting that you won't know anything about this business until you study every transaction for all these parameters. From admitting that you are new in this field and will be ready to watch as you learn, learn as you watch, because the next buyer is going to be different. You will have to zero-base your approach for every consumer. It's only much later that patterns will emerge and speak to you and from those patterns, you can draw some conclusions. It all depends on the leadership you are willing to show. You are no longer the steel magnate on whom half the country depended. You are no longer the big employer on whom employees depended for their daily bread. You are now dependant on the consumer and, this is important, on your employees. Your staff will earn your bread for you, by their customer care, by customer management. That is why WalMart says, our associates make all the difference. The coronation of the consumer has to start with the leader and from him, his associates will learn. If you do not alter your mindset, your associates and employees will not learn customer management and if that does not happen, your associates will not make any difference."

How do companies like Morro make that big shift from manufacturing to a service orientation? .