Tata Tea’s ‘Chai Unchai’, even as the company has only three outlets, post launch early this year, it is testing waters across different consumer segments. While its first outlet came up within the IIM campus in Bangalore, the other outlets have come up within an office complex and a mall.
One of the big objectives of the Chai Unchai venture is to connect with youth in a differentiated manner. The rationale to set up Chai Unchai was prompted by the fact that the out-of-home food and beverage segment is “large and growing.”
To top this, the Tata Tea portfolio was tea, coffee and even water, so the company was gunning for a larger share of throats. But out-of-home tea consumption was largely happening at the corner teashop where the consumer rarely knew or bothered to know what brand of tea was being served. Tea tends to hide in the pan that it’s boiled in, unless it’s a teabag.
Chai Unchai attempts to make tea more poignant and front-of-face, yet down to earth. At Chai Unchai outlets, the company is offering not just tea and snacks at an average billing amount of Rs 40. It is also experimenting with other cold beverages. The learning process is huge. They are trying to adapt to various elements of the mix and optimize.
One of the Chai Unchai outlets, for instance, is bang in the middle of a food court, with brands like McDonald’s and KFC in the vicinity – the flow of customers will be easy to track and even compare. One of the important lessons that the company has picked up is that instead of investing heavily in fixed assets, an outlet of Chai Unchai can easily be unscrewed and transported to another location – like a piece of do-it-yourself furniture.
While Tata Tea is mastering the entire business of out-of-home tea retailing, others like Nokia and Madura Garments are making incremental gains. The moment of truth happens at the retail end, branded retail becomes the Key. The company uses customer feedback in both its product and service offerings, and dovetails it into the back-end.
Looking for cues are very important for Nokia, as emerging trends play a huge role in new product introductions. And the company introduces new products by the dozens at one product every week. Nokia introduces 52 new models every year. While successful models last for 18 to 24 months, with the maximum value coming in the initial four months, unsuccessful models can die in as little as six weeks. Hence, the retail end proves to be extremely critical. Company executives say that using customer feedback, Nokia is now looking at introducing localised pre-loaded music and ringtones.
Madura Garments has examples where the retail store triggered an alarm or became a laboratory. In the case of Louis Philippe, the starting point of introspection was that few young men were visiting its outlets. As research found that the brand was seen as a label worn by executives above 35 years, it soon paved the way for a newer extension that caters to the younger audience.
At present, Lp has six stores. Soon the company will launch Lp Luxury, for the upmarket buyer. The strategy is to serve multiple customers and also be available on multiple occasions for the same customer. The planned extension into the women’s range came about when it was observed that trousers with smaller waist sizes were flying off the shelves at Allen Solly outlets: women were picking those up for themselves. Also, Van Heusen has been extended into Vdot, a lifestyle range for men. Vdot has Swarovski crystals on a party shirt. Few would have imagined that a Van Heusen would have that.
The accent on retail has also helped Madura cut spends on advertising as a percentage of overall sales. In the past, when most of its sales were through the wholesale route, the company invested 10%-11 % of sales on advertising. Now, it spends only 7%-8 % of sales on advertising. Still there is scope for improvement. International apparel companies spend only 3%-4 %.
Company-owned retail might have strong fringe benefits like gaining consumer insights. But it cannot be all encompassing. Feedback and insights cannot be the single largest causal factor for huge investments in retail. Other research initiatives like a web-enabled direct feedback mechanism, market research for post-purchase experience are some aspects that are equally important.
Also, relying purely on retail-based research means feedback can be captured only from consumers visiting the store. Own retail channels are an excellent medium to romance the target customers. The flip side to this is that the brands are not in a position to cover the entire target audience. Moreover, customers shop in multiple locations. Hence, consumer insights from other channels like trade and department stores would also be required.
The opportunity that company owned retail stores provide is undeniable. But most companies are doing nothing of that opportunity. Being physically close is not the same as being customer-focused. Airlines industry in US is the closest to customers. Yet, in the US, the service standards of most airlines are below expectations.