The increased sophistication in retailing has come largely as a result of the transformation in consumers’ expectations, rising purchasing power of consumers, availability of a wide range of products and brands, and growing exposure to international styles of marketing, have brought about this transformation.
In recent years, costs of retailing that on investment costs, operating costs, and overheads have been going up. Cost of shop space/shelf space in particular, has been skyrocketing especially in urban centers. Moreover, modern retailers, as a class, adopt a contemporary approach to retailing and vote for attractive shops and showrooms. They periodically renovate and redecorate their premises. Thy also employ skilled and trained salesmen. In many cases, competition drives them to this approach. All this naturally leads to an increase in the overall retailing cost. The increased costs make the retailer demand higher margins.
The escalation picture given above was the factual position until a couple of years back. With more and more shopping malls of larger shelf space running into thousands of sq ft. and corporate companies plunging into the retail business with direct tie ups with sources of supply the margins have reasonably come down benefiting the consumers on prices and quality goods. The super markets or malls are now entering rural areas to tap the potential of consumers there.
Take the case of Hypercity in Mumbai, India which clocks an average of 7,000 footfalls during weekdays, which rises manifold during the weekend. All 25 POS (point of sales) in the format are being utilised to retail products in the food as well as general merchandise categories. “Cash point” displays are used to retail products which are bought by customers on impulse.
Some brands, though, appear to have looked at the science behind the effective leveraging of this space. One such example is the Frito-Lays display with the ‘Choose the Flavor Contest’ from its latest campaign featuring MS Dhoni and Saif Ali Khan. The thematic use of the campaign asking shoppers to pick the flavor from the bin placed near the POS was not only a good usage of space, it also helped in generating off-take for the flavors.
The Coke company runs in specific modern trade chains offers exclusive discounts bundling different products from Coke India’s portfolio,. The battle at POS factor becomes especially hot during weekends and during family holidays. The company has used customised out-of-home media, which add appeal to the POS points as well.
Such initiatives have started forming part of beverage category management programs. Racks with messages like ‘refreshment zone’ are put up next to the POS counters to make the proposition attractive to the customer.
Given the popularity the space commands, retailers too have begun cashing in on checkouts to push their own labels and brands. Mall of Future Group states that by and large, this space is used by the group’s formats to pick the best in-house promotions on offer and pitch them near the tills.
If Future Group’s stance is one of using the space exclusively for store brands, players like Hypercity are looking to drive off-take by partnering with other brands. It is mutually beneficial for both parties if we drive it together.
Taking the instance of Cadbury Lite, which is targeted at health conscious customers It did good business at the checkouts. They try and put products which are ‘impulse’ but have a higher recall. Yet another instance was the introduction of Rite Cereal Bars, where the brand wanted space only in health food shelves. The team suggested placing the brand in bins near the checkouts. It did good volumes considering it’s a new brand being launched in the market.
Companies like ITC are working closely with modern trade players by sharing studies and other information from across the world. Some of the trial generation activities for the personal care business have been jointly worked out with modern trade partners keeping their consumer interests in mind.