I remember during my tenure with Koj est (way back in 2004-2009), I was handling a cosmetics brand Mikyajy and one of the most successful campaigns that we executed was creating our own marketing medium. Yes, it was our first initiative toward creating our “Owned Media”.
Yes, you have guessed it right… it was a Seasonal Product Catalogue.
It was designed in the form of a magazine, showcasing the products, step by step guide on how to get the seasonal look, and educational content pertaining to makeup.
The catalog was instrumental in driving footfalls to our stores as we executed the door drop campaign in the residential areas within the proximity of our stores across UAE and KSA.
The response was amazing as customers walked into the stores with the catalog copies asking for a particular shade.
Nostalgia is the best Emotive trigger
Catalogs create anticipation and expectation for customers.
They showcase brands and reflect their personalities and enhance engagement and aspirations.
Why Catalogs are back?
Digital versions took the place of the typical catalogs wherein the brands took their catalogs digitally and hence we saw fewer catalogs from the brands.
I recall a statement from Jeff Bezzos’s book, “Everything Store”, in order to stay agile and relevant, focus on things that are not going to change in the near future.
Things like:
People still want to connect with others.
They need to engage, have experiences, explore, and learn.
They want to be entertained.
They need to establish their position and identity within society.
Catalogs are predictable.
Catalogs are measurable.
Using sophisticated metrics, when a catalog drops into a home retailers/brands know exactly when to expect sales.
In best practices, retailers/brands have a 10-day strong selling window with a predictable bell curve model that allows them to time product deliveries.
Retailers can design the catalog based on the product which they would like to push more in the store.
High-margin products get more space in the catalog in the form of editorials etc.
Stores could stock those products accordingly & the selling window also enables them to gear up customer service accordingly.
To Learn more about growth hacks for supermarkets, grocery retailers, click here.
The touch points brands need to embrace.
It is the best form of “Owned media marketing” just like your social media pages and channels. It is also a tool for “Unified commerce”.
Brands like Warby Parker who is a true multi/omnichannel marketer, started as a digital native offering five eyeglass frames delivered by direct mail to shoppers.
Their only store was the showroom in their corporate office.
Their website evolved with the technology allowing 3D and augmented reality virtual try-ons.
Brick-and-mortar expansion followed as did their catalog business.
Even Amazon is leveraging a catalog to promote seasonal retail during the holidays.
Brands like The Body Shop and Benefit Cosmetics relied on catalogs as a direct marketing tool in the past.
If you are a Brand Owner operating in the beauty/fragrance genre & want to grow his/her business & need a retail expert to help you realize your vision then feel free to write to me at riteshmohan@yahoo.com or call +971502476483
Toys R Us which shut down its last store in Jan2021 is now making a comeback as a shop-in-shop concept with retail giant Macy’s.
As Fox Business reports, the Toys “R” Us stores inside Macy’s range from between 1,000 square feet to 10,000 square feet in size, with larger flagship stores set to exist in Atlanta, Chicago, Honolulu, Houston, Los Angeles, Miami, New York, and San Francisco.
Last month, Glossier (a beauty etailer) announced its distribution partnership with Sephora. (read the article here)
Nordstrom recently teamed up with at-home fitness brand Tonal to put mini-storefronts into 40 of its stores in an effort to capitalize on the boom of interest in home fitness.
Walmart had earlier set up Disney SWAS stores as well.
What is SWAS model (shop within a shop) & why it is helping brand to reinvent their physical retail?
One of the most popular strategies right now is SWAS, also known as ‘store within a store’.
Store Within A Store, also known as SWAS, is an experiential retail strategy where retailers set aside floor space for partnering brands to set up shop.
This may be done as a permanent lease or as a temporary pop-up lease strategy to drive footfalls into the main departmental store or even malls.
Pop-up stores are very popular amongst luxury brands as well as they get an opportunity to showcase their new collection in a high upmarket commercial space without opening a permanent retail store.
SWAS concepts will often involve value-added offerings in addition to just selling products.
This includes tutorials/product demos, roundtable discussions, or product sampling campaigns that enhance the customer experience and drive a buzz around the brand and the host retailer.
Post-Pandemic, most retailers are trying to reinvent themselves and the SWAS model is an excellent strategy to expand & increase brand presence.
Benefits of SWAS model for the host retailer/ shop in shop benefits.
Adding newness into the store without adding burden on capex.
Partnering with known brands attracts new customers for the host retailer
Maximum utilization of the store space by adding complementing brands to the host retailer’s offerings.
Additional source of revenue generation for the host retailer.
Changes in consumers preferences driving growth of SWAS model
Today, consumers are just as likely to discover new products on social media as they are in-store.
Moreover, 81% of consumers say that they research a product online before purchasing it in any channel.
Why SWAS is a good model?
Having maxed out their online audience and facing increasing acquisition costs, many successful D2C brands have taken the plunge of bringing their products offline to participating retailers.
Product Visibility and product trials are the key to growth.
Retailers can provide unique value by offering experiences in-store that shoppers cannot get online.
Opportunity to touch & feel which is not applicable to the online shopping experience
To learn how a toy retailer could add million dollars to their profits, click here.
Physical stores are a crucial touchpoint – but not necessarily the point of purchase.
Today physical retailers are moving their mindset from Transactional relationships with their customers to “imparting experiences” to build brand loyalty.
Allowing customers to book an appointment via the website for a free makeover, lead the customer to experience not only the makeup brand but uplifts the probability of higher purchases in-store.
Focus of right merchandise mix.
SWAS model helps the brand to optimize their merchandise offering, instead of offering everything, it gives them an opportunity to curate the right product offering which is a more focused approach towards inventory planning.
If you have a young son or a daughter at your home who is fond of gaming whether it is Roblox or any other platforms, You will observe that they get involved and engaged in the gaming environment so much so that they start associating themselves with the characters of the game.
Whether the games are PUBG, Fortnite, league of legends, or Minecraft, one thing is common with all these games is the level of addiction and engagement to succeed to the next level.
Why do gamers get hooked on games?
The author Nir Ayal in his book “Hooked” explains this phenomenon as 4 step process.
a trigger to begin using the product,
an action to satisfy the trigger,
a variable reward for the action,
some type of investment that, ultimately, makes the product more valuable to the user.
How could toy retailers use 3D print phenomenon to their advantage?
If you observe the consumer’s behavior while they are hooked on their game on their pads or gaming console, you will discover the underlying need that exists inside each one of them and that is the need “ To be the part of the game” i.e. superhero fans want to be “immortalized in plastic” by seeing themselves become action figures.
Frankly speaking, during my younger days, I was a big fan and collector of GI JOE figurines and toys.
With the advent of tech tools, the dream for millions of gaming fans is coming to life.
Wherein they can create their own figurine or get “immortalized in plastic.”
Gadgets like 3D printers and facial 3D scanners (which are now available as an app as well) bring the dream of creating your own 3D printed figurine into reality.
Hasbro, the world’s biggest toy manufacturer is spearheading this revolution into the world of Hyper Personalisation for their customers.
The Hasbro Selfie Series, which employs 3D printing to let consumers create a collector-grade six-inch action figure in their likeness for $60.
The team at Hasbro will initially launch with costume designs from G.I. Joe, Ghostbusters, Power Rangers, and Marvel, as well as designs inspired by Star Wars heroes.
To make a figure, fans download the Hasbro Pulse app, scan their face, customize the action figure and hairstyle, and send their mock-ups to 3D printers.
Join my FB group of Retail Evangelists, using this link, click here.
The 3D print advantages to retailers:
Hyper Personalisation will lead to creating brand loyalty which will result in sales.
Building a community of gaming enthusiasts and creating a virality of your campaign without spending on celebrity endorsements.
An unique gifting proposition to gift someone you love their personalized figurine in the costume of their favorite gaming environment.
Want to learn more about Hyper Personalisation, click here.
Check out the video
Summary:
Indeed a long road ahead for our middle eastern toy retailers to look beyond trading.
They need to create experiential gaming hubs using the Hyper Personalisation model similar to the Hasbro selfie series.
If you are a retailer and in need of bespoke strategies to grow & scale your business then feel free to reach out to me.
email me riteshmohan786@gmail.com
My book, ― “How to become a shark salesman”, provides tricks, concepts and hacks to grow your business by learning the Art of selling & become a ―Shark in selling.
Walmart announced a 97% leap in online sales, and some physical stores saw earnings drop by as much as 256%.
Brands worldwide urgently shifted their efforts toward capturing consumer engagement in the digital world.
Retailers who are adaptative and agile quickly learned how to compete with eCommerce, instead of competing with the new buying preferences of the customers, they embraced e-commerce and the convenience of shopping it offered.
We call it the rise of Omnichannel retailing and
I call it “One Retail”.
Recently, one of the middle eastern homegrown eCommerce retailers 6thstreet.com announced that it shall be opening its first retail store in Dubai.
Retail fact 1- Do you know why eCommerce businesses are turning to physical retail?
There is one aspect of the “One Retail” business, that even eCommerce could not match or offer and that is “customer interaction or engagement as it happens in a physical store” & building of a bond by exercising exceptional customer service.
The actual value of the retail environment today is in the less tangible, value of emotional and experiential engagement that only physical retail can offer.
These softer elements are fundamental to establishing long-term consumer loyalty, brand reputation, differentiation, and, ultimately, sales.
Retail fact 2 – It all boils down to customer Experience.
Customer impact takes into consideration customer service, how engaging the store’s design, layout, and features are, and the overall experience that customers have when they visit the store.
A PWC report revealed that when brands offer a superior customer experience, their customers are seven times more likely to purchase from them than from their competitors.
Zappos, instead of focusing on shortening the call times of their call centers, encouraged their call center team to build customer relationships by understanding their buying preferences and knowing them better overall.
Retail is here to stay:
“Nike Live” concept: smaller-format, community-focused stores with tailored offerings and rewards based on local customer feedback and insights.
Even if the final purchase is made online, the importance of the memories, experiences, and emotions tied to the physical space cannot be underestimated in how they contribute to a final sale.
After all, 55% of shoppers visit a physical store before making a purchase online. This is “brand impact”—the role of the physical store in making customers feel more loyal to the brand.
Creating experiential hubs within the store is the key to building engagement.
Ritesh Mohan
The US retailer, Target is increasing the number of “in-store shops” from the likes of Disney, Apple, Ulta Beauty, Levi’s, and Lego offering customers the benefit of multiple branded shopping experiences all under one departmental store.
For the in-store brands, it is providing a platform to reach out to a new segment of customers.
Ikea’s central London stores provide free planning and house-organization services, rather than being a traditional showroom of products for sale.
This may seem like a simple business move—opening new stores to attract new audiences—but its success lies in how Ikea has adapted its retail model to focus more on providing customers with new services and experiences tailored to urban living, rather than simply opening more stores of their famous warehouse formats.
To learn about how to franchise your business, click here
Retail fact 3 – Customer acquisition is the new game of Retail:
One of the most important reasons why eCommerce grew was the low cost of customer acquisition in terms of digital ad spending vs revenue.
But as the organic reach of e-commerce becomes lesser and lesser coupled with the high rising cost of digital spending per click, lots of eCommerce brands are looking toward physical retail to acquire a new set of customers.
As the cost of ad spending increased across digital and social platforms whereas the rentals across all the major markets showed a decline hence it became a lucrative proposition for the eCommerce retailers to open shops and up their customer acquisition game.
Summary:
One aspect that the eCommerce business has taught me is the new retail analytics or matrix.
Instead of focusing on sales per sqft or GMROI, I have started looking at any retail business from these two parameters.
Customer acquisition cost.
Lifetime value of acquired customer.
In my opinion, by focusing on these two parameters, the conventional retail parameters/ matrix automatically falls in place.
In today‘s digital era, everyone is selling to each other.
Employee selling his skills to his employer,
Entrepreneurs are selling their ideas to Venture capitalists,
Boy friend selling his aspirations and dreams to his girlfriend & kids are selling to their parents and vice versa.
Hence we all are in the SELLING Business.
Gone are the days when a chartered accountant used to say, I am not into sales.
Today right from CEO of an organization to the lowest rank is in Sales Business.
My book, ― How to become a shark salesman provides tricks, concepts, and hacks to grow your business by
learning the Art of selling & become a ―Shark in selling.
Ritesh Mohan is a passionate retail professional with over 22 years in the Retail sector, handling some of the biggest brands in the 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.
Ritesh specializes in Retail management, Product development, 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.
A franchisor is defined as a brand owner who has a proven system of store concepts that can be scaled for economic reasons.
Understanding what it takes to become a franchisor and how franchisors operate and grow is essential.
Having worked with both franchisee and franchisor, I have learned these tricks the hard way.
(At Koj Est, we were both a franchisee and franchisor of brands like Mikyajy & Nayomi-private label brands)
This article brings forth a few tricks that a business needs to take prior to becoming a franchisor (i.e. appointing a franchisee to run the same business in new territory).
Deciding whether your business can be franchised.
As a business owner, you need to realize that not everything can be franchised.
You have a great concept that you can teach and that’s simple to execute.
There must be an advantage to franchising for you & your franchisees.
The concept must make enough money both for you and your franchisees.
Check if your shop concept can make money, how many stores under your management are making money currently. This forms basis for the like for like analysis.
What is your merchandise holding costs?
Your merchandising stock turn ratio- is it 3 months, 6months or a year.
Your breakeven period based on location segmentations.
How long have you been in a business?
Do you have a franchise manual to replicate the processes, design templates, merchandising processes, replenishment processes for your franchisees?
If you have answered these questions in the affirmative “Yes” then you are ready to proceed to the next steps.
To learn how to build robust franchise systems, click here
Why will anyone want your franchise?
This is the most critical question that as a business owner you need to answer.
What is an ideal franchisee partner look like for your kind of business?
Who is going to be attracted to your franchise opportunity?
Normally, the cost of acquiring a franchisee is very high and may take a long time to find the right partner and do due diligence on them.
A successful proven system forms the basis of why your franchisee will pay you for replicating your system in his territory.
As a franchisor, you may offer support in terms of initial setup training, sales training, L&D eLearning courses;
There are multiple models like initial franchise fees, royalties on sales, marketing, and training fees.
Few franchisors charge a margin on the products sold to franchisees and few lease the equipment or property that they have.
All these fees are deducted from the franchisee’s bottom line and hence answering the below questions becomes critical to ensure the robustness of your franchising program.
Will your franchisee still be profitable?
Will your franchisee still receive acceptable return on investment?
What would be your franchisee’s initial upfront investment?
Does your prospective franchisee support a sizeable portion of required investment? How is his banking creditability?
The best way is to work out a forecasted P&L statement for your franchisee and show them the Return of Investments over a period.
Franchisors need to budget for New Franchises
In the first years of operating a franchise, the costs of supporting franchisees typically exceed revenue from royalties and fees.
New franchises will face the challenge of building enough capital to cover the infrastructure needed to support their franchisees.
This includes support for marketing, accounting, and operation.
This is where most franchising programs fail as the franchisors run out of the patience and budget that they need to sustain the franchise program.
Franchisors should be aware of these costs and know how many franchisee units can afford to operate at a loss or break even. They should be cautious of expansion and should consolidate franchisees if necessary.
If, you are developing your franchise program & need a retail expert to execute your franchising goals for instance.
Ritesh Mohan is a passionate retail professional with over 20 years in the Retail sector, handling some of the biggest brands in the 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. Ritesh specializes in Retail management, Product development, 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
Farm to fork or Fresh to plate – Niches make Money.
Farm to fork or fresh to plate food tech concepts can re-vitalize FMCG brands into their new avatars.
The only way for FMCG brands to thrive in the digital age is to focus on niches.
FMCG is an acronym for Fast-moving consumer goods.
My inspiration to write this article comes from my interaction with my LinkedIn friend, Shahid khan and I am going to share some of my learnings from the newly emerging sector “Fresh to plate” or “farm to fork”.
These two terms were unheard of in the early 2000s or even in traditional FMCG (fast-moving consumers goods) kind of business.
Thanks to evolving tech developments and changes in consumer behavior,
customers are now open to accepting fresh food delivered to their homes and convenience which comes attached to it.
Any company operating on a farm-to-fork business model controls the entire back-end supply chain, powered by stringent cold chain control to maintain the quality and freshness of each product.
This starts from the time of procurement, processing, storage to the time it reaches the end consumer.
Watch the video advertisement to understand the farm to fork business.
Hope the business proposition for “fresh to the kitchen” or “farm to fork” is now clear.
Is D2C (direct to customer) similar to ecommerce?
A traditional food Ecommerce site may contain various categories such as fresh foods, packaged foods – spices, condiments, etc.
But when you focus on one category of the overall eCommerce grocery retailer, you started aiming for a niche segment that forms the basic premise for any D2C brand.
The D2C market in India is at a growing stage and is expected to attain a size of $100 billion by 2025.
D2C sales in the middle east region are estimated to account for $17.75 billion of total e-commerce sales in 2020, up 24.3% from the previous year.
The pandemic has played a major role in accelerating growth for the sector.
D2C has the obvious advantage of direct consumer connect as they control sourcing, procurement, logistics, and distribution directly to customers, removing the channel margin-eaters from the value chain.
In D2C, the brand look after the entire supply chain modules of the business.
What is the margin-eaters for any FMCG player?
The answer is mainly the end retailers’ margins, distributors’ margins, fixed costs, below-the-line marketing activities, and costs & finally advertising.
So in D2C business, your margins (retail & distributor) are saved whereas your customer acquisition costs are increased which over a period of time comes down with an increase in online orders and volume.
Challenges in D2C business model like “farm to fork” or “farm to plate”
Building a robust infrastructure that can sustain growth and enable quick scale-up. This needs a bottom-up approach.
Tech tools to maintain the temperature of warehouses, transporting trucks between 0-4degree.
In the middle east, it is one such challenge wherein the temperature soars to 50% degrees during peak summers.
The “farm to fork” kind of businesses, need continuous investments.
Investments in terms of infrastructure creation, creating distribution hubs, trucks, Talent, digital initiatives, and most importantly tech support.
Farm to Fork- D2C model
Licious – brand’s core achievements in emerging unicorn startup in India.
Licious is 29th unicorn to emerge out of India in 2021
The latest funding would help it compete better with players such as FreshToHome and Zappfresh, as well as large players like BigBasket and Swiggy
Licious serves over 1 million orders every month
Fresh meat and seafood is still an underserved and unorganised sector that holds an opportunity of $40 billion
Technology tools in D2C or farm to fork businesses
Online Ordering Platform
In the D2C business, your online ordering platform or app is the front-of-house place where your customers interact with your brand.
From a profitability point of view too, it’s always preferred to get orders on your own platform so that you do away from the third-party commissions.
AI controlled logistics distribution cold chain.
Robust delivery systems within a hour within city limits.
Online ordering and processing – customer acquisitions
Customer retention
Online marketing
What the Middle East players like (al islami, alyoum, alain foods) must do to re-invent themselves?
Challenge themselves– first foremost thing the regional players must do is to challenge their core business model and practices.
Bring Fresh perspectives in thinking instead of shouting “freshness” in their advertising slogans.
Start thinking keeping 10-year horizon. Formulate strategies that can sustain the business for the next decade and command its leadership position in the marketplace.
Leverage their core infrastructure and combine it with the layer of technology innovation, keeping the customer centricity in mind.
Leverage their network of HORECA – not to sell the merchandise but in customer acquisition or pick up points.
Throw the modern trade thinking capinto the bin– Start imaging a world or marketplace wherein there exists no hypermarkets, supermarkets or power retailers. Then answer the question,
“How would you still be able to service your end customer?”
They formed a community of fishermen in south India or “solidarity-based agricultural undertakings” as called in the western world or as a “cooperative movement” in the democratic world.
Bringing fishermen online
The app works on a simple and gamified model.
Once a fisherman opens the app, the camera “reads” the fish, and detects the variety, size, based on which the fisherman puts in his bid.
At the other end, one or two “feet on street” bid at auctions, pick up the catch and transport it through the cold chain to respective hubs.
The app reads the fish based on neural network training that detects the kind of fish.
They use an AI-based, US-patented technology.
The consumer has to pick a product from the platform.
The produce is shipped from central hubs to distribution hubs, from where it is transported in vacuum-sealed pouches, cold boxes, and temperature-controlled trucks
“FreshToHome’s brand proposition is to provide food that is 100 percent fresh and with zero preservatives.
Definitely, not an easy feat to achieve in an unorganized sector such as the fish and meat industry in India.
India alone consumes USD 30 billion worth of meat products annually. The size of the market makes it attractive for the food tech players & investors.
Any FMCG brand that can disrupt itself first, disrupt its own processes and thoughts, have a better chance of survival in near future.
Any of the frozen food middle east players, seeking to get a fresh perspective on initiating their business plans for the food tech ventures, now know their GO-TO person (#retailritesh)
About the author
Ritesh Mohan is a passionate retail professional with over 22 years in the Retail sector, handling some of the biggest brands in the 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.
Ritesh 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.
One of the sectors that saw huge spike in usage was undoubtedly ecommerce, logistics and fintech companies.
Buy now pay later is one such fintech solutions which is disrupting banking sector especially credit cards.
What is Buy Now Pay Later (BNPL)?
Buy Now Pay Later (BNPL), as the name suggests, is a micro-credit instrument.
It’s function is similar to credit card, that I allows consumer purchases just as a credit card.
BNPL users get to split their eligible online or offline purchases, i.e. purchases made with partnering merchants, into zero-to-low interest instalments or repay the total dues at a later date within the repayment cycle at no interest charges, according to the terms and conditions of the BNPL service provider.
For example, if you buy something in a store or online, you may be offered the buy now, pay later option at checkout.
If you get approved, you usually make a small down payment at the checkout.
You would then pay off the remaining balance in a series of interest-free instalments.
Why so much noise for “Buy Now Pay Later”?
Pandemic has changed the way we shop or our buying behaviour,
Convenience is the buzz word and if it comes with easy credit facility then it becomes a trend. (in urdu we say,sone pe suhaga, means cherry on top of the cake)
Global e-commerce transactions totalled $4.6 trillion last year, up 19 per cent from 2019, a report from Worldpay says.
BNPL accounted for 2.1 per cent or about $97 billion of that sum. (source: worldpay)
So, when you are talking about a trillion dollars sector, then it gets all the attention it needs in the marketplace.
There are a number of BNPL players vying for a share of the Middle East market, including Spotii, Postpay, Cashew, Tabby and Tamara. Australia’s Zip, a global BNPL platform, bought Spotii for $16.25 million in May this year.
Learn how to develop your Influencer Marketing Plan, Click here.
Why Millennials are in love with Buy Now Pay later (BNPL)?
Millennials hate conventional banking.
They are not interested in high interest rates on cards, and recurring fees.
Convenience of easy on-boarding. (Hassle free documentation of BNPL attracts them).
BNPL service providers often use new-age mechanisms to evaluate the creditworthiness of an applicant; thus, the customer onboarding process is usually fast and convenient with zero documentation requirements or joining charges.
The entire process is digitally enabled through internet-connected mobile devices or apps.
Upon approval, a BNPL service provider issues a line of credit based on its assessment of the user’s creditworthiness and income.
After signing up, users can visit a partnering merchant application, website or offline store (in some cases), add the desired items to the shopping cart, and select their BNPL provider’s payment option at ‘check out’ to buy the selected items in a secure one-tap manner.
Users can then convert their dues into zero-to-low interest EMIs, according to the terms and conditions of their BNPL service provider.
These BNPL companies are operating like mini banking institutions wherein they incentivize the purchase with cash backs, extended credit facility etc.
How does BNPL operate?
The main premise of Buy Now Pay later companies is “Consumerism is here to stay”
Ritesh Mohan
“Why wait for tomorrow when you can have your favorite gadget or dress today at equated monthly installments, which are interest free”
BNPL player’s services or model help countless customers, especially the ones who have just started working, to better manage their expenses by allowing them at least a few weeks to make the repayments.
BNPL services, thus, are rewarding spending tools for those who are yet to recover from the many financial shocks of the pandemic-induced lockdowns or are outside the credit card ecosystem.
Word of Caution- Buy now pay later
Customers must keep in mind that a BNPL facility is still a loan that needs to be repaid in full on time to avoid penalties and an adverse impact on their credit scores.
Since the sector is in its developing stage, following are some challenges.
Customer and Merchant acquisition
Getting both customers and merchants to come online with BNPL player is one such challenge, however BNPL players are identifying themselves as more of the omnichannel solution providers to the retailers in order to mitigate the risks involved.
Goods returns
Returns can be an issue, too.
If you return an item, it can take substantial time and effort to have the BNPL credit provider acknowledge the return.
You may still be obligated to pay your installments till the issue is resolved
How does the BNPL players make money?
At the outset, the financial looks similar to that of credit card company.
Net take rate represents the commission charged to merchants (Take rate) minus payment processing fees that the BNPL company pays.
Debt financing cost corresponds to the interest BNPL providers pay banks for liquidity (to provide loans to their customers). Debt management cost equals the credit check costs plus payment collection costs minus late fee payments collected from customers.
Provision for debt impairment is the weighted average percentage of loans that are not paid back (i.e., bad debt)
GMV refers to Gross Merchandising Value, the sum of all payments conducted on the BNPL platform.
Marketing and sales expenses are the expenses incurred as BNPL providers acquire and onboard both merchants and customers to their platform.
General and administrative expenses include team salaries, technology, and other infrastructure costs.
Let’s take an example: Suppose your net take rate is 5% (assuming merchants pay you 6% and you pay 1% in payment processing fees). If you pay 1% interest on your loan, and it costs you 1% to manage consumer loans, the percentage of your non-performing loans can’t exceed 3%; otherwise, you lose money.
Profitability for BNPL or for that matter with any tech firms is based on
Scalability – acquire more customers and merchants.
Incentivize the purchases especially up-selling using BNPL product.
Negotiate better terms with both Merchants and Banks (for debt financing cost).
Access more data on customer’s spending and build a separate data insight report for the merchants to buy and take benefit.
Buy now pay later – a boon for ecommerce sites.
Reduce cart abandonment rate.
This is the main challenge for any ecommerce site is to reduce the cart abandonment as over 40% traffic that comes on to the site, leaves the cart without click on the “Buy now” tab.
Improves the basket size by means of upselling. Hence your average transaction value increases along with the average transaction quantity.
Ecommerce retailer gets their full payment while their customer enjoys installment plans. This helps in customer retention and build trust.
Lower customer acquisition cost- Increase in sales for the same amount of efforts done in getting the online traffic through marketing efforts.
Attracts first time buyers with the installment option at the time of check-out.
Since the cost of earning new customers is up by over 50% in the last five years, keeping your current customers is more valuable every day.
Summary
Providing your customers with many payment options is essential to boost customer experience and it can help you convert more shoppers into paying (and loyal) customers.
Buy Now Pay Later option just does it.
It’s a win-win option for both fintech BNPL players, Banks, Merchants and consumers.
References: The Guardian.com, Observer’s Fintech , thefinancialexpress.com , worldplay.
About the Author
Ritesh Mohan is a passionate retail professional with over 22 years in the Retail sector, handling some of the biggest brands in the 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.
Ritesh 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.
Recently, I completed a program on retail transformation from one of India’s Premier B-school (IIM-B), and during the course, we undertook several case studies like Threadless and big basket, Webvan, and stitch fix.
Stitch fix is one of my favorites as I relate myself to the fashion & beauty world.
I am writing this article to help my readers and retail fraternity members to take learnings from the real-life case of Stitch fix and learn as to how Katrina lake (founder of stitch fix) transformed her business model.
What is the stitch fix model?
The Basic idea with which stitch fix started was of providing a Personal styling fashion experience and provide customers a personalized fashion outfit, all at a subscription fee model.
Stitch fix selects and mails clothes, shoes, and accessories to its clients based on an extensive style survey (i.e. data).
The better the “stylist” selects the clothing, the more money Stitch Fix makes.
Basically, it is like Netflix of the fashion world.
(Similar to how Netflix suggests programs on your viewing behavior or patterns).
Since its business model is based on predicting the styling that will suit their customer’s preferences hence it became obsessed with Data analytics and understanding their customer’s fashion sense and preferences.
Challenge is “Getting the style and outfit right for the subscriber every time”.
Learn how Rent a Runway is on its way to becoming the Netflix of fashion, click here.
Data is oil – Stitch fix “tinder for clothing”
As part of their Style Shuffle—a “Swipe right” type of “Tinder for clothing”— Stitch fix has found a way to reach beyond the feedback they’d get from customers through buying alone.
By letting customers swipe through different styles in their entire collection, they amass tonnes of data that helps them better understand the customer, as well as age and demographic trends shaping the fashion industry.
More the customer spends time swiping the garments, is leaving a digital cookie which is then analyzed towards his or her liking for the fashion garment.
The model is very addictive as Tinder since you are shown garments that a professional stylist has shortlisted for you.
Data points on their customer’s preferences make stitch fix’s proposition more profitable.
Stitch Fix makes money on clothing sold more so than subscription fees.
The more clothing from one box that fits or flatters, the more profits they will make.
Why Stitch fix is successful?
Stitch fix changed the paradigm
Stitch fix is not fashion but a “tech company which deals in fashion”.
Instead of fighting head-on with physical fashion retailers and eCommerce companies, stitch fix has created a blue ocean strategy for them by finding their niche in data analytics.
They share the data points with the designers who in turn ensure that their garments are made in line with their customer’s preferences and likings.
“Feedback” is the main crux that stitch fix has provided to designers who never knew about their designs and creations sales movement.
Now with stitch fix, they feel engaged with the customers.
With enormous data points, Stitch Fix is able to see not just products people buy, but products they want to buy.
That’s why I give them the credit for changing the paradigm completely.
Whereas traditional fashion brands are either competing on prices or eCommerce companies on the fastest deliveries, Stitch fix has found their niche is providing personalized fashion experiences to their subscribers.
Their commitment towards their “why” (purpose) is so strong that the founders chose to start the company in the Silicon Valley (being a tech hub) rather than moving to New York City (fashion capital).
They had clarity on the core strengths of their business right from the start.
Learn 10 growth hacks for eCommerce business, click here.
Algorithms & Data analytics coupled with Human stylists – Recipe for success.
They aim to bring personal styling to the masses, using data and machine learning to deliver personalization at a mass scale.
Watch the video on why stitch fix clothes have better sizes and fits.
From filing a lengthy questionnaire when customers sign up – evaluating factors like lifestyle, body type, and most-wanted items ;
Stitch Fix’s ‘Style Shuffle’ feature on its app and website allows it to amass huge amounts of data.
Building robust communication channels with subscribers
On receiving the box containing five clothing and accessory items, the customer gets a sense of belongingness as they’ve provided their preferences and selected by the stylists, just for you.
Customers provide feedback after each shipment since they know that their feedback will help stitch fix deliver more garments that they want to buy and not what stitch fix wants to sell to them.
It’s two-way communication.
Want to learn the basics of category management in 5 mins, click here.
Combing the art of discovery and convenience
The fun of discovering the most sought-after garments, that are personalized and customized as per your body type/fit is beyond capturing in the form of words.
Getting your fashion quotient boosted through personal stylists gives a confidence-boosting to the subscribers which remain loyal to the brand since their self-esteem & social needs are getting fulfilled at the convenience of their homes.
In an interview, Katrina Lake, founder once said,
“Our business model is simple: We send you clothing and accessories we think you’ll like; you keep the items you want and send the others back.
We leverage data science to deliver personalization at scale, transcending traditional brick-and-mortar and e-commerce retail experiences.
Customers enjoy having an expert stylist do the shopping for them and appreciate the convenience and simplicity of the service”
I believe this statement from the founder summarizes the brand’s purpose.
References; HBR case study – case study reprint 2018 (IIM-B) , CMO network, Guy Raz book-how I built this.
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 the 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. Ritesh 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.
The film “Super 30” is not only a film but a mission of uplifting students from the lowest economic strata.
Uplifting them by fulfilling their dreams for a better life, better education.
To execute this mission requires Leadership. Leadership is a skill that sets the winner apart from the rest.
“What is the difference between a leader and a manager”?
I was recently asked this question and I replied by narrating an example; have you ever taken a taxi ride? You as the guest gives direction to the driver on your destination and how fast you need to reach.
Here Driver is playing the role of a manager.
Based on experience, he works out the shortest route, time, alternate routes in case of traffic, basically, he is using his skills and resources to ensure that you reach your destination on time or even before time.
You are playing the role of a leader in this example since you have figured out the destination/ goal (which is part of your vision) and are clear that you need to be at your destination at a particular time.
And the tasks that you need to do by reaching your destination.
If the situation demands, you do inspire your driver to push the limits by taking alternative routes and trying out different ways to reach your destination. You incentivize the driver once the journey is over and he accomplishes his goal.
The main role of a leader
Provide a vision, goal and inspire his men to believe that the goal is achievable and show them the way by providing team desired resources and making his team realize the importance of goal achievement by aligning them towards a common goal.
Recently, I watched the movie “Super 30” which inspired me to write down my learnings from this movie.
This movie pushed me to think like the main protagonist, Sir Anand Kumar (played by Hrithik Roshan) and I went home with a question in my mind, “What inspires a common man to do great things for his nation?”
My key learnings from the movie “Super 30”.
Persistence
Persistence is the ability to stick with something, your purpose for a long time. It’s the quality of being determined to do or achieve some purpose.
Anand Kumar faced all challenges in pursuing his mission of educating students from the lowest strata of society and his vision of seeing all his students clearing IIT-JEE exams.
IIT- JEE is one of the most stringent competitive exams in the world with a passing percentage of less than 1%.
Sometimes, without our knowledge, we tend to ignore our inner voice which keeps pushing us in a direction that was destined for us. Management gurus call it “Finding your purpose”.
Once you have identified what you are good at, just focus on that strength and make it invincible.
Believe in Yourself- Super 30
“When the times are tough, it is the tough who gets going”.
Remembers challenges and difficulties are Almighty’s ways of polishing you into the finest diamond. If you believe in something, then pursue it with all your passion and energy to ensure that you succeed.
As a teaching pedagogy, Anand Kumar inspires his students to think beyond numbers, relate this craft with sports wherein you master the craft by regular practice and hard work.
In Boxing sport, a good boxer does not learn or practice 100 kinds of punches but he focuses on 1 kind of punch by practicing it 100,000 times. So when the time comes, this one punch will become invincible and would win the game for him.
Never let the success enter your head
“Super 30” is now a mission and a brand recognized by Time magazine, universities like Harvard and MIT (Massachusetts Institute of Technology)
Till today, “Super 30” classes are being run from the same compound & shelter from where it all started. Apparently, until today, the students are from the lowest strata of economic classifications & free education is being imparted.
Watch the real hero here
Conclusion
The man behind Super 30 is an inspiration for all who believe that talent has no address but it takes the right attitude to find and achieve it.
I dedicate my article to all my teachers, entire teaching fraternity, as the saying goes “Teachers are truly the Nation’s builders”.
Read management lessons from the film Parmanu, read here.
Watch the video synopsis.
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. Ritesh strongly believes in empowering business owners with his wisdom & experience of around two decades in the industry.
“Are retailers in the middle east region, creating a virtual value ecosystem?” was the question asked to me recently in one of the retail forums wherein I was co-presenting.
At first, I complimented the questioner for asking such a great question and opened the question to the audience.
The question got the audience engaged and there were many responses from the audience which satisfied the questioner.
I went home with the question in mind, “What is the virtual value ecosystem?; I had earlier studied Porter’s value chain formats but was not sure about the virtual value ecosystem.
This article summarizes my learnings from various online research articles and reading case studies from the Harvard business review.
What is the Virtual value chain?
Every business today comprises of two worlds- a physical world of resources that managers can see and touch and digital/virtual world which is made of information and data.
The later gives birth to eCommerce
It is the amalgamation of “Marketplace” and “Marketspace” to create a virtual value chain or ecosystem.
F&B retailers mainly those of quick-service restaurants (QSRs) take customer orders both from physical stores as well as from online customers coming through zomato, food panda, talabat, etc.
Value Ecosystem/ Chain Model
The value chain is a model that describes a series of value-adding activities connecting a company’s supply side (raw materials, inbound logistics and production processes) with its demand side (outbound logistics, marketing, and sales).
Retail Demand planner or Merchandising manager often uses information from their retail point of sales system i.e. inventory – store wise and warehouse wise, inventory in order or in transit to control stock replenishments in their stores.
However, they rarely use information itself to create new value for their customers.
That’s what the paradigm change is brought by the Virtual value chain ecosystem.
Let me explain using an example
FedEx or DHL (now copied by almost all logistics companies) allow their customers to track their order on their website.
Now the customer could locate their parcel, orders and also get an alert as soon as the courier is delivered and the name of the recipient is also shared.
This service comes as value addition or as free of cost, thus FedEx has created added value in their delivery process and thus loyalty of their customers.
Learn as to how luxury brands are disrupting accounting practices, read here.
The Big data
Retail companies invest in ERP systems for their managers to plan, execute, control and evaluate results with greater precision and speed.
Technology helps in creating a virtual value chain offering for its customers.
Have you ever seen a merchandiser of the FMCG brand working in a hypermarket?
Ever wondered as to why the salesman/merchandiser of an FMCG brand carries a computing device (nowadays a tablet) while visiting one hypermarket to another.
They collect information on the sales of the products, inventory levels, store by store and feed it electronically.
They also capture their competitor’s activities about sales and promotions, new product launches, etc in select locations.
By combining field data with information from each stage of the value chain, brands can now better determine levels of inbound supplies of raw materials for their production facilities, plan for their truck coverage in an optimal fashion for efficient coverage, plan for sales offers to combat their competition in a more efficient manner.
How retail companies could use the virtual value Ecosystem?
The virtual value chain redefines the economies of scale.
Retailers today can optimize their inventories, shipping lead times, margins and promotions (markdowns of slow-moving inventories) much in advance.
Retailers who use omnichannel (i.e. both physical retail and eCommerce) can provide the access to their customers to track their online purchases or even the purchases made through the online but pick up from the designated store ( Buy online Pick up at store option).
As a result, Customer not only gets visibility of their order but also get their complete purchase history.
Do you know the biggest problem with millennials?
Converting the gigabytes of data into useful information is the biggest challenge in today’s time.
Retailers who can de-code this gap would emerge as winners.
Do you want to implement a virtual value chain ecosystem for your retail business? Feel free to reach out to me on riteshmohan@yahoo.com
References: HBR strategies for growth, retail gazette, Inc.
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. Ritesh specializes in Retail management, Product development, and Brand Management, Retail Operations, Sales Management, and Franchising Management. He strongly believes in empowering business owners with his wisdom & experience of around two decades in the industry.
