Vivette D’cruz
Director – Consumer Products & 
Retail – Ernst & Young LLP

A retailer may have the money and required infrastructure to set up new stores but that doesn’t necessarily mean that his business has expanded. A lot of considerations such as availability of funds, a good team and a sound understanding of the demands of potential customers in the new place should matter before making the most expensive and often high-risk mode of expansion. Vivette D’cruz, Director, Consumer Products and Retail, Ernst & Young LLP, opened the session on ‘Essential winning principles of expanding your business’ at The Retail Jeweller India Forum 2018, by focusing on how retailers across India have initiated growth and opened more stores despite stagnant demand. While newer stores may allow a temporary hike in sales but to sustain expansion, a retailer must have a competitive positioning and advantages, clearly defined growth scenarios, adequate funding and internal readiness. The session deliberated on these key principles of expansion and what it implies to retailers in the business.

Numbers driving expansion

Referring to a study of the top 7 retail jewellers of India D’cruz highlighted how during 2011-2013, their top line grew at 36 percent but during 2013-2016, it dropped to a mere 10 percent. During the same period (2013-16) like to like store growth dropped from 14 percent to a negative 4 percent. Despite a decline in sales, actual store expansion of 19 percent did not drastically come down. It was still at a healthy 14 percent. “None of these brands really slowed down as expansion stayed within the range.” 

While setting the context, she went on to explain four key principles that most of these brands adhered to as part of their expansion plans.

Competitive advantage

While planning expansion, identifying the competitive advantage comes foremost. “Most jewellers claim design to be their advantage.” Just as a majority of the audience, comprising of reputed jewellers, agreed to having unique designs as their competitive advantage, D’cruz threw open her next question – “How does the same advantage really create a difference to individual marketing strategy?” She next outlined how this could be used to one’s advantage in a highly competitive market.

Picture this from a customer’s perspective – they want to own jewellery whose designs are rare enough to be limited to a few stores only across the country. “This means that as a jeweller, you have to create highly intricate designs factoring in the possibility of the designs being copied by your competitors. If that were to happen, you promote another design in the market and invest in skilled craftsmen and workshops which competition finds unviable to emulate. Thirdly, it makes sense to innovate with designs every 3 to 6 months to ensure your customers have the best from your latest inventory,” she stated. While at design, D’cruz stressed on the importance of developing design uniqueness. “Every jewellery company has a design team that makes rounds of trades and fairs to work on the latest designs. Why not visit uncommon places for inspiration or take cues from the latest trends in high-end luxury bags, apparel and footwear?” she suggested. Talking with customers, however, is ideal inspiration.

For retailers, their quality of product, service, location and other features from the supply chain act as competitive advantages. “Analysing customer expectations, gauging your organisation’s competencies and studying the business strategy of competitors will help you know your competitive advantage,” opined D’cruz.

Clearly defined growth scenarios

As much as the tastes and expectations of existing customers aid in future growth, knowing how to locate potential customers and involving them in the business model is crucial to expansion, felt D’cruz. And to achieve this, “You must understand your brand proposition.”

An extension of brand positioning is to understand the importance of pricing the product right. D’cruz shared an instance of the role product and pricing plays in expansion and scalability of any business. “A luxury jewellery retailer is known to create intricate designs and sell them at premium prices. However, the brand started creating similar designs at more affordable rates just by reducing the weight, to achieve the scalability objectives,” she explained.

Customer data analytics has a pivotal role to play in facilitating expansion plans. “Particularly for local and regional expansion. It helps to know where customers come from, what they buy, the stores they buy from and how frequently they visit stores.”

D’cruz pointed at yet another emerging trend aiding expansion – the new retail format of stores in malls. She acknowledged that high streets stores are common but the inventory turns are restricted to 1-1.5 times and the working capital investment is often high. “New store formats such as malls expose the retailer to new customers with whom he can build his brand value and expect better returns. One of the biggest national retailers has more than 50% presence in malls located in the top 8 cities of India,” she cited.

Highlighting the importance of online channels, she said, “Although it contributes only .2% of the market, one should not underestimate the power of the online medium.” So what if customers aren’t actively buying online, a sampling with 2000 customers showed that “60 percent check out designs online before heading to a store.” Be it offline or online, the products that have been showcased must be available in stores to ensure customers a hassle-free buying experience. D’cruz explained, “According to a consumer study, we’ve observed that a retailer’s investments in learning programmes, return and savings schemes go a long way in building trust among consumers. Therefore, constant customer engagement is what a retailer must invest in for marketing and promotion.”

Finally, she mentioned how retailers need to take cognizance of emerging categories like daily wear and occasion wear.  “While bridal will remain the mainstay, the under dogs are steadily growing.” D’cruz referred to a survey conducted across 7 cities and 10 top retailers which hinted that “a startling 40 percent of their inventory comprised of products which were priced at Rs 50,000 or thereabout.” This reflects how jewellers are trying to lure the customers with low entry point inventory. 

Funding model

Crucial to expansion plans, D’cruz spoke about the different means of funding that businesses take recourse to. “They use their own funds or have a third party partner in franchising or allow bigger companies acquire a share of the business to boost growth.” If a retailer wants to grow on a state-wide scale, then franchises are a given, with partners sharing common business goals, with a common brand strategy. D’cruz, however, cautioned retailers to maintain a similar experience across all stores or else, “They will act as different brands in different cities.”

Internal readiness

D’cruz elaborated on the need for the right team in order to expand a business. “The team should provide constant inputs on the market situation, help in merchandising and build a strong digital presence.” She further added that one must have an efficient value chain throughout the stores to provide optimum customer satisfaction. “Challenges like delivery delays or weak customer support at a particular store can hamper sales,” she stated. Having the right processes with the team is the backbone of success. “Constant customer feedback and after sales support will retain the trust factor and thus, ensure recurring sales and business growth,” D’cruz signed off.