From spending dollars to saving paise : Back to basics of cost cutting

When I came to Mumbai in early 2007 , there was a barber down the street Near my hostel . Unlike many others in the main road it was slightly on the off road and no frill barber shop where other jazzy shopes charged 75 to 90 per hair cut this guy charged only 25. Initially he had equipment only enough to support his operations plus a music system. After some visits I started noticing the change in the shop , old music system was a gone and a new one with surround sound was purchased , entire front wall was replaced with glass walls and than came the AC. He now even has a TV inside the small shop. Talking about charges it has gone up slightly from 25 to 30 which I feel was acceptable given the kind of facilities he has added, specially the AC ( and yes give some credit to inflation as well).

What was the necessity of adding so many facilities which are none essential to his operational activities , he can give many logic1) To attract more customers from higher end who would like to have thier hair cut in AC saloon2) To make waiting time of customers more comfortable 3) May be it is for the owners own comfort , he had positive cash in flow , he thought why not make life more fun at work for myself and employees.

Once all the facilities are set up now he does not have any way to track which facility is adding how much to his income , customer retention or operational efficiency , he has not even made any effort to do so. Each of these facilities have definitely increased his expenses to a significant level. So much so that now he may be working on a very thin margin and any change in market will make his operation unsustainable , what if tomorrow a no frill shops start in neighbourhood ( just like he was two year back) , it will surely take away atleast 25-30% of his customers who are not bothered much about AC and music in the saloon.

Recently in a discussion with one of the professior at SPJIMR , he mentioned that IT firms had a tendency to spend lavishly when cash flow was good and margins were high , this is what has put them in all kind of troubles today however small firms are always conservative in thier spending . I will have a slight difference of opinion here , It is normally characterstics of any individual or organization to climb up the spending ladder as his income grows. He is always attracted by some thing which seems just a little better and little expensinve than what he already has.

The Barber down the street is just an example , even a vegetable hawker would try to add facilities for his comfort as and when income grows ( not necessarily this will add to his revenue). So it is common tendency , and this is the entire focus of cost cutting in bad days. To some extent IT companies did over spent in building those glossy structures and than they needed to hype up salaries of their employees because thier global counterparts were ready to poach trained and groomed talent at almost double and triple the cost. Once upon a time the indian BPO employee used to get around 2200 $ a year which was 1/15th of what thier US counterpart would get but now this difference has narrowed down to 1/8 and very soon it could have been to 1/4 eliminating the very basis of competitive edge which was delivered by Indian vendors , probably a good cost control in bad times will again take organizations to some basics.

Evolution of Customer Experience : Retail

One of the oldest business of the civilised society, what all changes it has seen in terms of customer experience.
“The Shopping is no fun” Experience:

Historically this business started with small shops catering to different needs. For a customer there was no fun being in these shops why?
1) There used to be only one narrow counter where all the customers have to line up. Most of the time counters were designed in a way so that customers have to stand outside the shop.
2) One or two attendants serving customers for whole day so in rush hours customers have to make extra effort to draw their attention.
3) Customer used to receive only what he asks for, all the brands, sizes, shapes could not be placed on display shelves.
4) Shops used to cater only a particular need , there were different shops for grocery, cloths, footwear’s etc.
Overall it was a tiring experience for the customer, he felt happy to get out from the shop as early as possible.
“Delighted to be ” Experience:

By 1862 seeds of organized retail had started germinating, this was the year 3 players who would change the future of retail industry started their operation. Kmart, Walmart & Target , there is not much to discuss about K mart but it is interesting to see how walmart and target decided to provide very different kind of experience to the customer in the same retail business. First of all let’s see come commonalities which they brought
1) First time customer can experience the satisfaction of seeing & feeling almost all major brands and before taking any decision , as larger shelf space made sure that all prominent brands for the same category are displayed at one place.
2) Customer could walk at his own ease in privacy; he did not have to ask someone to give him the merchandising; however reps were few meters away whenever there was a query.
3) Now it was time to make sure that customer does not waste much time on counter waiting in queues for transaction to be processed.
4) The shop floors were huge which meant customer can come with entire family or friends and shop.
5) As these stores received discount from vendors on volume, they passed their savings to customer. Which gave customer feeling of getting value for their money?
6) Advanced point of sales systems made checking out easier, it not only gave a sense of comfort to customers but also helped retailers in maximizing customer’s time spend on the floor shopping merchandising rather then waiting on POS.
So some of the common experience enhancements were: Sense of independence, A better ambiance, Satisfaction of having checked all available brands, I can shop at ease and my own pace, value for money.
“Shop till you drop” Experience:

Late 90s and early 20’s started seeing altogether a different side of retail , customers were now being spoilt, not only by the choice of merchandising but also by providing various facilities in the store.
Food joints: Some of the retailers leveraged on amazing combination of having food joint inside the shop, Shoppers Stop, bigbazar , spencers, Trent and many other retailers were now giving no excuse to customer to go out of the shop.
Child care : Many retail outlets started having special children zone where trained employees take care of younger ones while their parents shop. This is amazingly relaxing for mothers who can not leave kids alone at home .
Not only this , lifestyle retailers in particular have been spending a lot on their ambience which has given birth to various shop interior consultancy firms who claim to know art and science of shop interior.
WalMart here also broke all the records and started keeping photo labs, dry cleaners, optical shops and hair salons in its super stores in early 90s
The experience was of complete peace of mind , shopping in an environment where one does not have to worry about anything.
“From my couch” Experience:

After satisfying all kind of sense in the shops, retailers started driving sales by technology. As the new generation started getting tech savvy, retailers knew its time to take the store the house.
Several have tried their fortune in online retailing or e-tailing but not too many success stories. Tesco remains international leader because of following
1) Ease of shopping online: Online shopping can be a very complex business hence the focus has to be bringing simplicity in customer experience which Tesco & Amazon have done quite well with the help of good technology and customer data.
2) Personalization: This facility of offering you items which may be of your interest could have never been a possibility in a brick and mortar business of several hundred square foot but in e-tailing this is the vantage point. Tempt customer with her interest , giving him a personal experience of being cared.