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The founder and CEO of GoFrugal Technologies, Kumar Vembu was interviewed in The Business Line, the business newspaper from the Hindu group. Kumar had the discussion and interview with the Deputy Editor of the newspaper. The entire transcription is available in YouTube in the following Link :

http://www.youtube.com/results?search_query=kumar+vembu&page=1

In a free-wheeling interview Kumar discusses and shares his insights on various topics ranging from why he choose to be in a product company, on IT service companies, slowdown in kumbakonam, about his dream , about his teacher and of course a lot about the retail.
Links for few specific topics on Retail is given below :

1. http://www.youtube.com/watch?v=iEiczLhrElM

Here Kumar talks about “In which segments of Retail we can find greater technolgy absorption” ?

2. http://www.youtube.com/watch?v=3axmXrQnHXM

A SWOT analysis on organised and unorganised retail.
3.  http://www.youtube.com/watch?v=-Mc_Ejz8w2c

Here, Kumar discusses about the Best practices of traditional retailer that are worth emulating.

4.http://www.youtube.com/watch?v=4mr-mvqXls8

On how the average Indian retailer is connected.

5. http://www.youtube.com/watch?v=ElrJvsN2TNE

On the Mobile applications in retail.

Hope you find it useful !

- Sivakumar

So, what constitutes our friendly neighbourhood Retail ? In a typical neighborhood of about 100 families or above what all retail stores/services we can find ? We can the define the criteria for the “neighborhood” as - it should be in a walkable distance - a 10 year old kid in the family or the eldest grandma/grandpa in the family should be able to walk and buy the things.

Basic Necessities

A departmental store/Kirana shop, a pharmacy store and a vegetable shop are the bare necessities. Sometimes the vegetable shop forms part of the departmental store itself but mostly available as a separate entity. Though the above shops take tele-order and do home delivery, mostly the customer walks-in and purchases the stuff.

Also included in the basic necessity comes the milk vendor and the newspaper vendor. Both these services are home delivered on a fixed-monthly-fee basis. For most of the homes the daily morning chore starts with the above two - a dose of the daily news and a hot cup of coffee.

Add-ons

Along with the above, a bakery, a sweet and savories shop, a chicken/mutton/fish stall, an exclusive fruit shop, a mini restaurant/hotel completes the food/grocery requirements of the neighborhood. Typically these shops may be little farther (within 1to 1.5 kms) and service two or three neighborhood clusters. They may also prefer a fair bit of floating population (adjacent to a bus stop, main road or a junction)

A mini kirana shop (”petti” kadai or a Paan shop equivalent) which mostly stocks cigarettes & related stuff and a tea/coffee shop (standalone or part of the mini kirana shop) are also the necessities in the above areas.

A fancy store and a stationary store to meet the school going kids requirement are the other two shops you can find. They sell the typical bangles, bindhi, toys, greeting card, school maps, note books etc. Some of these shops also sell mobile SIM cards or one can find a exclusive Mobile stores which sells both the handsets and SIM card of all brands of SIM. (Even 10 years before it would have been hard to imagine a SIM card selling store in your neighborhood !!)

Already I can count 16 different types of stores/services to be offered.

Services

A dhobi(Laundry) service, barber shop, tailor shop, cycle service centre, two wheeler repair/service centre, flour-mill are the typical services which you can find in the vicinity of the neighborhood. While these services mostly expects the customer to walk-in and get served, other service providers like electrician, plumber, electronics services engineer are available on call.

Other Stores

Having the reach for three or four neighborhood clusters, these stores typically serve for a much larger audience. Some of these stores are electrical spare parts, general hardware, electronics items, automobile spare parts, paint shops, furniture store, sports shop, photo studio/development centre, household articles like vessels etc. In the food and grocery segment you can find a coffee powder vending shop, rice vending shop and oil vending shop. In the upmarket areas a florist is the recent addition one can see.

The major segments that are missing in the above list are – textiles & garments, footwear, luggage items and Jewellery. Though we can find stores of these type in our neighbourhood, typically the patronage for these segments is comparatively low. Guess most of the customers still prefer the large format stores present in the commercial areas over that of the neighborhood stores (at least for these segments).

On a further micro level you can find transient stores which specialize in only one product and usually sell at a particular time only – say a flower vendor who sells only flowers near a temple only during evening, a tamarind merchant hawking the tamarind on his cycle only during morning and so on.

We can also add a plethora of utility services to the above list – Photocopy services, Internet browsing centre, Courier services, Tours & Travel services, Tuition centres, Creches, …..etc etc.

As we can see there are almost 50 different types of retail products and services (excluding the govt/PSU based service like banks, Post offices ..) serving the consumer. It will be impossible for a single or several big players to dominate such a market. It will always be the story of both organized and unorganized retail co-existing together and as usual the Customer will be the king.

Sivakumar

I was a panel member  in the Reinventing Organizations: Lessons from the dotcom burst session at NASSCOM EMERGEOUT 2009 in Chennai. Here is a summary of my ideas on the lessons learnt during the session

1. When slowdown or recession happens, different markets for products and services are impacted differently. When the recession is over and there is overall growth in the economy, how each market is impacted can be broadly classified in to 3 categories
   - Markets Disappear / Vanish : A product or service is no longer needed and so demand for the same becomes non-existent. In this case, it is important for a company to recognize and invest resources on new markets / opportunities
   - Markets are depressed, but stabilize and stay depressed : Demands become less i.e. overall market size shrinks. But the market stabilizes at the lower levels. There is scope for consolidation in this case where the market leader walks away with the large chunk of the market. It is important to align investment, plans and expectations with the changed market scenario
   - Market grows during and / or after the recession & slowdown : It is important that the vendor invests on quality, brand building and reach to become the market leader to exploit the opportunity
So, there is no one rule for all. Each one must analyze where they are and prepare a plan that best suits them

2. Packed lunch or preached advice never last long. So, it is important that each one learns to listen, question, analyze and make their own judgment on which way the market is heading, what is their vision of the future state, how they perceive the company’s role in such future state and plan accordingly

3. Intense engagement is key to survive and win : It is important to listen to customer(s) and learn the market trend. Increase the resources / time spent with customers and spend more time understanding the customer need. Also, switch from sales based planning to demand based planning. In manufacturing and supply chain, it is proven now that companies that implemented demand planning dealt with much lower inventory related issues due to slow down. So, it is important that management measures the increase / decrease in leads, opportunities and deal pipeline to assess the market trend for the products and services. It is critical that people in sales and marketing talk the truth and gives a true picture on these so that management has great visibility on the demand and can do good demand planning. The management must also have an open mind to assess the opportunities and challenges in the market rather than be in a state of denial or hope against hope. Here it is important not to have a cast-in-stone plan but be very agile and flexible in reacting to changing market conditions

4. If you must do a layoff, please call a layoff a layoff. We see most of the major IT companies in India going extraordinary lengths to prove that they did not do a layoff and they just fired the poor performers. We must learn from the US companies on how to handle layoffs. It is important that we understand the psychology of the person being laid off and not make it harder for them to deal with the situation. When a layoff happens, especially in a small company, everyone including the management, other coworkers who keep their jobs and the laid off staff goes through lots of trauma and hardship. So, it is important to show sensitivity to the emotions and make sure the layoff is done in a very transparent and professional manner. It is also important that everyone looks at a layoff either as a condition forced by the market or by the incorrect planning of the management. In simple terms, management must be transparent in terms of sharing the challenges faced, the plans and make sure the entire company faces them as one team

5. Finally, have reasonable expectation and set reasonable expectation with everyone involved with your business from investors to employees, from partners to customers. Setting expectations that you cannot meet, you cannot meet in a profitable manner or those you cannot meet consistently in a sustained manner are the reasons for many of the problems we face

I am sure most of us know these.  I just want to reiterate these simple, what I consider 101 rules of engagement

– Kumar Vembu

It has been 2+ years since the last update here

The last 2 years were eventful for GoFrugal. We continued our momentum and have more than doubled our customer base in the last 2 years. We also made great progress in terms of the breadth and depth of our solutions
The verdict is out on the phase I of the battle between organized and unorganized retail. It is clearly the nimble and low-overhead small, unorganized retailer who won the first round. Clearly, the battle is not over yet and I am sure most organized retailers will come back with increased knowledge, the right tools and the correct economic model required to make it a success

The organized retailers are busy rationalizing their operations by renegotiating rentals and closing  down loss making stores, consolidating by acquiring and merging with others, raising finances to improve their balance sheets and to fund their cash flow needs. In contrast, the unorganized retailer is busy modernizing, upgrading and expanding their business

It is going to be interesting when the phase II of competition between organized and unorganized retail is played out. We have seen that both sides have learnt their lessons, both sides know the strengths and weaknesses of the other. Both recognize the opportunity that motivates them to stay in the game and both are aware of the challenges that face them. We are excited by the role technology can play in the profitable expansion and growth of the retail business, as the Indian population grows up

Are we at an inflection point in Indian retail where the organized retailers are forced to look inward and the unorganized ones are looking outward now ?
With so many changes being adopted in the process, technology and the regulatory areas, we see a whole world of opportunity in front of us
– Kumar Vembu

In the BW opinion column in Business World issue for the week 17-23 April 2007, there is an interesting statistics about sugar consumption in India. It says

“As people have got more money in their pockets, they have been eating more sweets. Sugar output has responded to the demand. From 13 million tonnes in 2004-05, it increased to 19.3 million tonnes in 2005-06. But it could not keep up with demand. Sugar price, which was in the range of Rs 17-21 a kg in January 2005, had risen to Rs 21-23 by the middle of 2006″

You can read the entire article at Procurers in Trouble

This is shocking given that India is the diabetic capital of the world and I see more and more people getting health conscious et.al. Leaving this serious thing aside, this points to the raising demand being the culprit for inflation. If increase in income levels can have close to 50% increase in sugar consumption over 2 years, imagine the increases in consumption of rice/wheat, pulses, cerels, vegetables etc.

If these statistics are really correct, the retail trade volume could really triple over the next 8-10 years, resulting in growth for both organized and unorganized retail

– Kumar Vembu

With increasing real estate prices / rent for retail space and ever increasing competition, it is getting more and more important to plan your retail business well. The location plays a very important role but at what cost, what is the revenue per square foot required for break-even and for profitable operations. Given the gross margin in your business and the average ticket [bill value] size for your type of business, what are the number of sales transactions to be done each day, what is the footfall required to achieve the sales target etc. are becoming very critical

In addition to these, the nature of shopping experience you wish to provide your customers determine the investment required [interior design is a major factor] for your business and the operating cost [number of customer service / sales agents] for your business. It is important that from the store design to the staff in the shop are determined based on the footfall, average ticket size, number of customers handled each day. It is also important to plan the number of checkout counters, the checkout process etc. are also a designed to suit your needs

To make the job of business planning and measurement easier, GoFrugal has launched a retail business planner and a retail health meter

The purpose of the business planner is to provide the break-even average sales per day, target average sales per day for profitable operations based on the gross margin, investment and operating costs. The business planner is aimed at making sure the retailers earn enough to sustain and grow their business. It is important to understand that to grow their business, retailers need to invest on technology and shopping experience on a continuous basis and it is not enough to set the store up and earn a livelihood from the operations. As most successful retail business owners are planning to relaunch their operations, in tune with consumer preferences and taste, I am sure the retail business planner will help them fine tune their plans
The purpose of the retail health meter is to give a perspective on a retail operation to the retail business owner. The health meter shows the profitability and the net return on investment for the current revenue and investments. This will help retail business owners understand how their business is doing and what they have to do to improve their returns

We are planning to improve both the retail business planner and the retail health meter with more analysis and tips on setting up and growing retail businesses. We are also planning to support these analysis as part of our retail solutions

Please feel free to share your feedback and comments to improve our business planning and analysis tools

– Kumar Vembu

Prof. Vaidyanathan of IIM, Bangalore wrote about Retail revolution — Trading away the livelihood of millions? in the The Hindu Business Line on March 8, 2007

While I agree that retailers should be encouraged to use technology including telecom and internet, I donot think the livelihood of small and medium retailers are threatened in anyway. I feel the current investments in organized retail will help improve the quality of life of people involved in retail trade

As part of my job, I read various research reports, articles and views on the growth and opportunity in retail. While numbers vary between these reports, we can still use them to see how unorganized retail will still have significant share in the retail business. Here are some numbers that I have seen in the last few months

• India’s retail trade is about Rs.10 trillion in 2006
• Organized retail share is about 3% [Rs. 0.3 trillion]. This means unorganized retail volume is Rs.9.7 trillion
• Retail trade volume recording about 15-20% year on year growth & is expected to be about Rs.35 trillion in 2015
• Organized retail is expected to have 15% share of the market in 2015
• The above means, organized retail will be about Rs.5 trillion & unorganized retail is about Rs.30 trillion

Basically, we can infer that unorganized retail volume is set to grow from Rs.9.7 trillion today to Rs.30 trillion in 2015. This is a huge growth and it offers significant opportunity for all

As Indian Consumers get more purchasing power, there is opportunity for everyone here. From the tiny trader to the global retail giant, everyone stands to benefit due to India’s growth. The fact that retail is the 2nd or 3rd largest employer means that more people stand to benefit due to investments in retail

I hope we start looking at these investments as an expansion of the overall market rather than what is one’s share in the market

So, the Kirana shop owner should concentrate on his customers and his business instead of wasting his time fighting investment in retail. At the end of the day, the new investments offers a win-win for the retail trader, people employed by retail trade and to the consumer.
– Kumar Vembu

As we see more retail chains selling fruits and vegetables, the road-side vendors are adopting an interesting pricing strategy. I felt the Yellaki Banana is getting more expensive over the last few weeks. It used to be Rs.12/- to Rs.15/- a dozen with a small fruit vendor near my home and has become Rs.18/- a dozen now. A retail chain nearby is selling the same at Rs.21/- a dozen and another chain 500 meters away is selling the same at Rs.24/- a dozen [nothing much to differentiate in the quality of the fruit as all of them are of similar size/quality]. I asked the road-side vendor why Yallaki Banana is more expensive now and does he know the price in the retail chain near-by. His response was a revelation for me. He told me, he checks the price every day and fixes his price a shade lower than the price fixed by the retail chain [so that he is very competetive and he can give better product / service]

I had a similar experience buying watermelon this season. Till last year, you pick a watermelon and the vendor will just see what you have selected and quote a price. But this year, many road-side vendors selling watermelon are equipped with weighing scale and quote a price based on the weight of the watermelon. While buying watermelon last week, I told the shop owner watermelon is cheaper in the chain store [just tried to see whether he knew the price]. Again, I was surprised by the response as this guy knew the price per kg at the chain and he also told me he rounds-off the weight to the lower kilo [5.6 kg watermelon was give at 5kg price]. He told me I will pay for 5.6 kg in the chain but only for 5kg with him [It is another matter that the watermelon that I used to buy for Rs.20/- last year is costing me Rs.30/- last weekend and Rs.35/- yesterday]

So, my conclusions : The retail chains are increasing the productivity of the road-side vendors as most of them can make more money than they used to [as the retail chains help establish / baseline the price in the mind of the consumers]. This is assuming the product is the same. In the case of fruit like watermelon and banana, the road-side vendor in his push-cart sells better quality product with better [personalized]  service and better shopping experience [bargain / have a conversation]

For now, consumers are paying a higher price for the same product [we are starting to pay for service also]. It is interesting to see the crowds inside the retail chain outlets and also watch the brisk business done by the road-side vendors

– Kumar Vembu

Over the last 2 weeks, online news portals, news papers, magazines etc. are analysing the budget extensively. There is a rare consensus on the missed historic opportunity to put India in a higher growth path

I feel there is too much attention on the direct and indirect tax rates and also the allocations and soaps to various sectors of the economy, while analysing the budget. The need of the hour are ways to reduce the compliance cost [for businesses] and the enforcement cost [of the government]. I think very little has been done in this direction

The government can learn a lot from the evolution of business over the last few decades to organize itself for more efficient administration. We have seen most businesses moving from a functional organization model to a strategic business unit model. These companies also have policy making, execution and review/audit responsibilities clearly defined.  Along similar lines, India can go for policy making bodies [which are functional], service departments [single window for every business] and enforcement agencies. Such organization can lower the enforcement cost for the government and the complaince cost for the business
Simplification of compliance, enforcement and giving businesses one interface to government, will pave the way for higher growth rates
– Kumar Vembu

There is an interesting article by Cait Murpy in CNNMoney.com on India titled India the Superpower? Think again. While I may agree with most of the statistics and the point about making a dent on poverty, we need to see things half-full rather than half-empty

India is facing a huge labor shortage in urban, semi-urban and rural areas. You cannot find enough people for agricultural jobs. You cannot find enough people for field sales/support jobs. You cannot find enough cooks, drivers, house maids, security guards, nurses, waiters, painters, carpenters, construction workers, accountants, retail counter staff etc. This is inspite of the demographic profile of India, where significant percentage of people are young and in employable age bracket. It is important to note that most of these young people are willing to migrate in search of opportunity [which was not there with the earlier generation of people]
Since retail is one of the biggest employer [after agriculture] in most economies in the world, retail becoming one of the high growth industries will help making India progress in the coming years

As more and more retail investments are made, as more medium and large companies [IT or otherwise] go to tier II cities [in search of talent], as more entrepreneur’s setup business in smaller towns and villages, it is becoming clear that the success of urban india will be replicated in the semi-urban and rural india in the next 5-8 years. I can relate our experience of meeting large number of people involved in retail business in India. Most retailers across India say a couple of things
1. Consumers are looking more for service today [and they used to look for best price in the late 90s and early 2000]
2. Manpower is getting more expensive and difficult to find with each passing day [to clean and repack food and grocery products, to arrange products in the shelf etc.]

The above indicates the need for respectably paid, low skilled jobs. Infact, training institutes and contracting agencies for such low skilled jobs in retail are opening up across the country. I am sure these efforts will bring more and more people into the employment pool [I can relate this to the IT companies recruiting people from all branches of engineering, science and arts graduates and making them IT professionals]. All these developments point to rapid creation of jobs for people with lower skills. I am sure this revolution offers great opportunity to eradicate poverty in India over the next few years [it will be much faster than we think]

Finally, I would like to quote from my personal experience of working in the US [vs working in India]. In 1994-95, when I was working in the US, I used to have this constant argument with my brother Sridhar on the productivity in India [I used to feel I was doing much more work as a Software Engineer in India than in the US]. Sridhar used to quote from the balance sheets of US companies and Indian companies to make a comparision on the per employee productivity and say that it is no-way-possible that you were doing much more [interesting, challenging and gainful work] in India. While US still ranks very very high in terms of innovation and technology, it is a proven fact that you get value for money by outsourcing work to India [get better productivity, I mean]. I came back to India because I could not accept that I was just keeping myself busier here and I am glad I could experience and be part of the progress urban India made in the last 10 years. Based on this experience, I have learnt that real action at the ground level is decides the future [and not statistics, which is history]
I am sure history will repeat on rural India in the next 5 years

– Kumar Vembu