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Rakesh Malhotra

COO | 29 Nov 2003

“B-class cities do not mean lower purchasing power. The difference lies in the size of the target segment; B-cities have a population of 10-20 lacs, but the percentage of the target segment is 20-25%. Compared to metros, the haul is almost double, with the target segment constituting 35% of the population, resulting in more walk-ins and volumes.”

Rakesh Malhotra, COO, Ebony Retail Holdings Ltd. has traversed varied fields before settling down with Ebony. In ‘86 he joined Finolex Cables as Assistant Manager (Sales). From 1989-96 he was Deputy Manager Export, JK Synthetics Ltd. and then became Marketing Manager, International, JK Industries International Business Division. In July ‘96, he joined DS Group as Chief Marketing Manager and grew through the ranks to stand at COO today.

In this session of Brand Speak, Rakesh Malhotra chats with Jasmeen Dugal on the growth of the retail industry, the potential of B-class cities, Ebony’s strategy of ‘Cluster Format,’ and the power of visual merchandising, among other things.

Q. What is the percentage of organized retail in the Indian retail market?

Estimated to be Rs 30,000 crore by 2005, organized retailing constitutes 2 % of the total retail business in India. Various estimates foresee the growth rate between 25%-40% for the next five years. We feel the growth could be much higher because of the lower base. Infact, only one chain with nationwide plans could make the industry grow by 10% if it assumes the right business model and execution.

Q. What is Ebony’s market share?

The department store category with 4-5 leading department stores, as part of a National chain with presence in both metros and non-metros, are churning out a collective turnover of Rs 800-900 crore, with an annual growth rate of more than 10%. Ebony has a market share of 10-15% in this category.

Q. Ebony has a network of mainly B-Class cities. What is the potential of B-class cites, considering the general perception that consumers are not as evolved in smaller cities as in metros?

B-class cities have a tremendous potential if the model is scaled up to quickly cover the unexplored markets. The target segment is close to 20-25% of the total population, which is sufficient to sustain the store.

Catchments are not shrinked as there is no competition – we get the first mover benefit; real estate costs are low, which results in lower overheads; and in recent years, people have evolved due to media exposure and increase in disposable income. The format, however, needs to be customized as per local requirements.

Q. Do B-class cities mean lower purchasing power?

B-class cities do not mean lower purchasing power. The difference lies in the size of the target segment. B-class cities have a population ranging from 10-20 lacs, but the percentage of the target segment is just 20-25%. Compared to metros, the haul is almost double, with the target segment percentage constituting 35% of the total population, which results in more walk-ins and volumes.

Ebony has a presence in Ludhiana, Jallandhar, Amritsar, Nagpur, Kanpur and Pune. These markets are at the evolving stage. People have started visiting the modern retail format and are willing to pay for the convenience, variety and availability. Ebony has a presence in Ludhiana, Jallandhar, Amritsar, Nagpur, Kanpur and Pune. These markets are at the evolving stage. People have started visiting the modern retail format and are willing to pay for the convenience, variety and availability.

Q. Tell us about your ‘cluster format’ strategy.

Our long-term plan is as follows – Ebony has consolidated itself in the NCR region and in the major markets of Punjab. In the NCR, we have a maximum number of stores. Here, the management has adopted a unique ‘cluster approach,’ which aims at expansion in a particular territory, with ‘clusters’ around a flagship store, resulting in economies of scale and the coverage of a number of markets.

Q. So how does this ‘cluster format’ help in controlling overhead costs?

It’s simple. A single advertisement serves the purpose in a particular region, decreasing the overall cost in marketing and promotions. And a single regional warehouse serves the purpose of the complete supply chain, logistics and warehouse.

Q. How did Ebony break the barrier that big departmental stores are not value-for-money?

A number of things went into this. We adopted a strategy of catering to the needs of the increasingly price-sensitive consumer; continually communicated our offers and price points inside and outside the store; saw to it that products and services, which do not add value to the store, the customers and the supply chain, should be eliminated; and focused on localized promotions, which helped in drawing traffic to the store.

In addition, Ebony is price-oriented and cost-efficient; upscale and convenient; offers a dominant assortment, superior customer service and tries to be innovative and exclusive. This adds up to create the honest impression that big departmental stores are value-for-money.

Q. Does Ebony adopt varying strategies for product display in metros and smaller cities?

The strategy for metros and smaller cities is the same, except for a few minor changes. Ebony has a complete in-house design service, and a planned approach is adopted for designing, building and installing store fixtures. Customized fixtures and cabinetry are designed for a new store with the help of professional designers, depending on the city and the property.

Our store design staff comprises a team of experienced professionals willing to work on lighting, traffic flow, layout conception and presentation ideas. Throughout the process, the floor plans and drawings of all new fixtures and cabinets come up for improvement. The goal is to develop a cost-effective retail environment that elicits an efficient, attractive, customer-friendly atmosphere.

Q. To what extent does visual merchandising induce walk-ins?

Visual merchandising forms a critical element of all our retail stores. Besides the facade and windows, which are clearly done up with an objective to attract passer-bys and induce walk-ins, the in-store decor is designed to enhance the customer’s comfort and convenience while shopping, and overall, offers a superior ‘shopping experience’ across all Ebony stores.

Q. What percentage of the total sales does your in-house brand – Ebony ETC – garner? Are there any plans to open a separate outlet for the private label?

Our team is working on the development of the in-house brand, extending it to multiple product categories and increasing its overall share in the stores’ sales. Various actions are in process: creating differentiation and price advantage; positioning ETC merchandise as a base stock; working on the brand management of ETC; working towards achieving a better margin; and efficient sourcing of the merchandise.

Ebony ETC contributes 18-20% towards the stores’ sales. Presently, there are no plans to open any separate outlets for ETC.

Q. What are the attributes of the in-house brand?

The main attributes of the private label are value, differentiator and innovation. It’s easier to adapt to the latest trends quicker than the other brands. It’s also planned to suit requirements like over-size, and is very proactive to respond to market and customer needs.

Q. Tell us about your plans to diversify into spin-off sections like the ‘Home Section’ and ‘Wordsworth.’ What is the nature of your alliance with ‘Wordsworth?’

‘Wordsworth’ is a brand promoted by Ebony Retail Holdings Ltd with a concept to meet the changing needs of book retailing in India. It is a concept store – a new chain of book store – which meets the need of book lovers by giving them more than just books; it is an opportunity for people to browse and buy the books in a distinct ambience, with a cup of coffee. Standalone model ‘Wordsworth’ is operational in Janak Place, New Delhi and Wordswroth shop-in-shops exist in Ludhiana, Chandigarh and Noida.

Q. Ebony has allowed a number of local brands to open shops-in-shops within the store. What is the strategy behind this? Does it act as a crowd puller?

The main strategy for shop-in-shops of local brands is catering to localization and the customization of market segments; it fulfills the local requirements of the area. Their sole existence proves that they drive the customers, and being local in nature, they penetrate strongly in the regions and act like a crowd puller.

Q. Tell us about some of your shop-in-shop tie-ups.

As every growing entity seeks healthy relationships, Ebony has also developed certain valuable alliances. The relationships extend every imaginable commodity to the end-consumer – apparels, accessories, personal care products, jewellery, household goods, crystal ware, music, books, stationery and furnishing.

The list of our partners comprises Lifespring, Planet M, Natalia, Provogue, Gini & Jony, etc. In this symbiotic relationship, our partners value our impact on their business model as much as we relish their presence on our floors.

Q. How do you train your staff for customer management?

HR management is acquiring new dimensions today. Staff training has emerged on the top of the agenda in Ebony. This is in accordance with the realization for the pressing need to align HR strategy with corporate strategy, redefine employee relations and devise a new HR framework for improving organizational effectiveness. To enhance the skills of our staff, we have tied up with the training and consultancy firm TMI; they will be conducting various sessions on the different aspects of ‘people development.’

Q. What is your expansion plans?

We are moving towards our long-term strategy – National coverage. All the expansion of Ebony is now based on the ‘cluster approach,’ covering major metros, non-metros and B-class cities.

Q. Do you carry out pre-launch dipstick surveys?

Yes, we carry out a number of surveys before the launch. These include feasibility studies, brand awareness surveys, competition mapping, demographics surveys, retail surveys, customer mapping surveys and requirement analysis.

Q. Tell us about your brand-building exercise.

We are currently working with Equus and have a regular brand building exercise through mediums like print, electronics, radio and PR. Our loyalty program is also very vocal. We will be coming out with a special brand campaign in the next few months.

Q. What kind of promotions does Ebony hold to reel in the crowd?

A promotion provides Ebony with the opportunity to expand sales and increase traffic, and also targets at building a brand where the consistent value for shopping at Ebony is communicated to the customers. We hold promotions throughout the year to keep the shopping environment full of fun and entertainment, and to make the shopping experience a memorable one.

All promotions till date have helped us in building a bigger traffic flow and obtaining a larger customer base. Some of the important promotions include ‘Monsoon Hungama’, ‘Winter Hungama,’ ‘Gold Rush:’ a combination of jewelry, coins and 1Kg gold as the main draw, ‘Khul Ja Sim-Sim:’ vinyl boxes with lucky draws, ‘Mega Sail’ offer – sixty cruises in sixty days, ‘E Dollars:’ hourly prizes, a New Year party/ free movie tickets for Elite Club members, and the ‘xiDiwali Mela.’

Q. How do you create a loyal customer base in cities that have a highly competitive retail environment?

Ebony has its own loyalty program – ‘Ebony Elite Club’ – a burgeoning member base with its roster exceeding 40,000 loyal customers, and expected to cross the 50,000 mark by end-2003. Depending on the purchasing power, members are classified into gold and silver.

Q. What is your average footfall?

It is close to 1000-1500 walkins per store everyday.

Q. What were the sales of the national brands vs. local brands in the last fiscal?

The contribution of national brands is around 60% while local brands contribute around 40% towards the total sales.

Q. What is your expected turnover this fiscal?

It would be approximately Rs. 100 crore.

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