Whoever said size doesn?t matter probably hasn?t been watching too many Bollywood flicks lately. Ever since the curvaceous Kareena Kapoor slimmed down to a 48 kg and catapulted herself to the top slot among her peers, the industry?s reigning queens?besides the look-alikes and wannabes?have embraced rigorous exercise regimens and myriad other means to be a size zero or thereabouts as soon as possible.
Size continues to matter on the shop floor as well. Albeit a different size. The bigger the better. Inflation notwithstanding.
Though large-format retail are supposed to promote one-stop shopping with products of all shapes and sizes belonging to different categories available, the fact is there is a distinct premium placed on large pack sizes?a.k.a. family packs?at these locations. Quite often they are the big draw at these locations as major retailers joust over consumer spends.
?That?s a way of enticing consumers to make a purchase by ensuring there is enough brand visibility for the product in the store,? says Raman Kwatra, vice-president, buying and merchandising, Ebony Retail Holdings, which runs a chain of departmental stores in Delhi, Punjab and Uttar Pradesh. ?Large packs ensure there is enough visibility for the brand. And it is visibility alone that will ensure sales, not to mention that the average bill value goes up with sale of larger packs,? he adds.
In a country where the penetration of organised retail is just about 3-5%, shopping at big malls, supermarkets, super specialty stores and hypermarkets is still viewed as a bit of a luxury, an ?experience?, in other words. In retail speak, it is all about ?destination shopping?. For marketers, therefore, it makes better sense to keep an eye on the price-to-value ratio when packaging products for superstores or club stores. Much like what the US value retailer Costco has done so well for so many years now. For the uninitiated, Costco focuses on selling products at low prices, often at very high volume. These goods are usually bulk-packaged and marketed primarily to large families and businesses.
?Shoppers want to spend time, look around,? says a retailer based in Mumbai. ?Many of them come with their families, especially over the weekends. So if you have large packs it makes for interesting buying because you can push discounts, give freebies, work out different permutations and combinations, which excites the consumer.?
Thus, if a customer buys a big bottle of Brand X shampoo, for instance, chances are she will get ?30-40% extra? at a price marginally higher than that of the regular pack of shampoo. Again, if she chooses four bars of soap from Brand Y, she may grab the fifth free?thus saving on the total amount spent. Sometimes, she may get a hair oil bottle free on the purchase of a huge can of cooking oil from the same company. This is a chance for you to purchase in ?bundles? and save anywhere from 20-40%.
These are just a few examples of how retailers and manufacturers try to lure consumers into making big purchases. By some accounts, this trend of inducing customers to buy large packs is growing despite the pressure of inflation eating into consumer budgets. ?Large packs deliver more value,? explains Gagan Banga, group spokesperson, Indiabulls, which acquired the Piramal-promoted Pyramid Retail last year with plans to aggressively expand the business across lifestyle, cash and carry and convenience store formats. ?There is more bang for the buck that a consumer can get as a result of this,? he says.
The margins are also more on large packs, which explains why the thrust on big packs by retailers in general. ?There is undoubtedly more money to be made,? says an executive at Delhi-based Vishal Mega Mart.
Though a larger bill value is at the heart of the strategy to induce big purchases at big stores, their movement off the shop shelves is fairly sluggish in comparison to small packs. Kwatra of Ebony Retail explains, ?It?s a factor of size really. Out of say 100 SKUs sold in a day, about 80 would be small and medium packs. The balance 20 would be large packs.? Prof Hemant Trivedi, head of retail academia at the Mudra Institute of Communication (MICA), Ahmedabad, says, ?Large packs are meant for long-term consumption and storage; hence its pick-up at the outlet would depend on the need the consumer has for it at that time.?
Smaller SKUs (stockkeeping units), in contrast, supplement the daily requirement of a consumer, which explains why its movement is faster on shop shelves. This consumption habit can be found at neighbourhood kirana stores, where the accent on small is very pronounced. Satchets, small and medium packs are the SKUs that adorn the front counter or dangle in loops right at the shop front. ?That is because a kirana store targets the daily needs of a consumer as opposed to a supermarket or hypermarket, which targets monthly or fortnightly needs,? says Andrew Levermore, chief executive officer of the K Raheja Corp-promoted HyperCity Retail (India), which runs a 40,000-square-feet hypermarket in the suburb of Malad, Mumbai.
?In other words,? says Gibson Vedamani, chief executive officer, Retailers Association of India (RAI), ?a kirana is a replenishment or a top-up option as against a supermarket or hypermarket, which is a stock-up option.? The fact that consumers travel some distance in India to make it to the nearest supermarket or hypermarket also seems to lend credence to the stock-up-top-up theory. ?Your neighbourhood store more often is a stone?s throw away from your residence,? says Levermore. ?Going there for a quick purchase is natural. Your visit to the hypermarket on the other hand is a planned outing,? he reasons.
Consequently, promotional offers help the prospective buyers to pre pone their purchase. Which also means you may not have to visit the neighbourhood grocery store as often as you did before. But that suits big retailers just fine.
Naturally SKUs are bound to be different at these two locations given the profile and needs of the customers walking in. As Sumantra Banerjee, president and chief executive, RPG Retail, promoters of the Spencer?s brand of grocery stores, hypermarkets and express stores says, ?The basic difference between a large-format and small-format retail store is that it caters to different need stages of the same consumer.? A consumer?s ability to purchase is also what drives retailers to stack big and small packs at large and small retail stores respectively. ?Typically,? says a retailer based in Delhi, ?the consumer walking into a large retail store has more money to spend than one who frequents a kirana store.?
But there is another reason, a lesser one yet relevant, for the tilt towards larger and smaller products at big and small stores respectively?inventory management.
Though retailers are not exactly unanimous on the point, some players admit that large packs help in supervision and control since they can ?pack in more? literally. ?So there are fewer SKUs to manage, which is not the case with smaller packs, whose numbers are large. This can make it difficult to manage not to mention that they are susceptible to pilferage and theft,? says Susil Dungarwal, a retail expert and also chief executive officer of Ishanya Mall, a large specialty mall based in Pune.
The small retailer?s inability to make bulk purchases of large packs is another reason attributed for his propensity to stick to small packs instead. ?It works well for him,? reasons Kwatra. ?His neighbourhood presence ensures that there are footfalls all the time. Large-format retail stores have to, more often than not, do something dramatic to ensure that the crowds come in.?
So there you are. If it?s size zero which is doing the trick for Kareena Kapoor and her fans, what seems to work for India?s value retailers is bulk. If nothing else, it?s one way of ensuring higher footfalls. It is also an immensely convenient way to do so.