For the sweeter times at PVMI
Increasing the employability of employees is a sure-shot way of winning long-term support

(column by Rajlakshmi Saikia)

There is buzz anew in the Indian fast moving consumer goods (FMCG) sector, which has of late, started to be derisorily referred to as the slow moving consumer goods industry. Written off by pundits after being hit by a deluge of losses in the past few years, the sector has risen, to quote a cliché, like a Phoenix from the ashes. With a flaccid 1.5% growth in terms of value in 2003-04, the industry witnessed a slow revival in 2004- 05, achieving growth rates of 6% (FICCI FMCG Survey December 2005) and ever since, there was no looking back. Earlier, the major players in the sector were hiving off unproductive businesses, leading to large retrenchments, are now heaving a sigh of relief. With opportunities galore, the great Indian FMCG mart is now on a roll and FMCG majors are looking at modes to milk the prospects. From a humble start in 1994, the Indian FMCG behemoth Perfetti Van Melle India (PVMI) – subsidiary of the global conglomerate Perfetti Van Melle – at present enjoys a comfortable 30% market share of the confectionary mart in India. Needless to state that capturing such a huge market share would not have been possible without a strong distribution network. PVMI at present boasts of a strong network of around 4,500 distributors spread across 2000 urban towns and this is backed by Perfetti’s most valuable asset – its people!

Whenever companies have to deal with the invaluable asset of people, there are various HR issues that come into play. The manpower challenges at Perfetti are not very different from those faced in other FMCG companies. In an exclusive conversation with Sugato Palit, Head-HR at Perfetti Van Melle India, the 4Ps B&M team attempted to probe into the ‘people challenges’ faced by Perfetti. Given today’s competitive scenario, Palit candidly talks about ‘retention’ being one of the key issues at Perfetti. Perfetti is perhaps not unduly alarmed by the issue which has been talked to death, i.e. ‘talent retention’ faced by companies today. This is because PVMI ensured that they change their outlook & strategy with the changing times. At PVMI, HR is more than just a support function, as the objective of HR is to be a ‘partner to the business’, and not just a staff function, which exists merely to monitor salaries & performance.

Nowadays, HR is perceived as the key driver for developing and ensuring optimal utilisation of an organisation’s only lasting competitive advantage – people. In general, HR has transformed from being a storehouse of sensitive information to moving to the forefront in terms of championing positive change, providing the right talent at the right time and ensuring a happy and focused workforce. The real challenge for HR in an organization is to be able to establish its credibility, ensuring its internal customers observe significant value in their contribution to the organisation. Palit emphatically remarks that in any organisation, people are perhaps the only ‘asset’ that ‘appreciates with time’. Keeping this in mind, it is easy to understand why Perfetti has adopted a unique approach when it comes to managing talent. Besides the usual method of hiring graduates from business school campuses, there is a higher emphasis on Perfetti’s two critical processes which work very well within the system.

One is the process of ‘Employee Referrals’, which works wonderfully, given that if an employee knows the organisation well, then he/she is bound to judge correctly the type of person who will fit into the culture, as it is the organisation’s culture that helps to attract the right people to fit into Perfetti’s community of people. The second process is that of Internal Job Posting (IJP), which strives to fill vacancy internally, if somebody has moved on. Employees of the organization have thorough knowledge of the vacancies currently available in the organisation and are free to apply, provided they meet predetermined criteria essential for that vacancy. The job description is given to the employees (similar to the manner in which it would have been given to an outside consultant), so that the employee can gauge for himself, whether he has the requisite experience and qualification to do the job. He would then communicate his intentions to the current boss and then an internal panel will consider each application through a standard process of selection. The IJP process leaves the employees with the feeling of exhilaration that the organization wants to provide them with more career opportunities. Another important HR aspect which is very critical at PVMI is the emphasis on training. Palit clearly defines the company’s focus on ensuring the employability of its people both within the system and externally, in order to ensure continuous and on going ‘employee development’. Training constitutes the single most critical aspect of an employee’s development in the organisation, be it on the job, internal, or external. As long as people see there is value-addition, they will automatically be inclined towards working for the company. The aspect of continuously increasing the employability of its employees (within or outside the system) is encouraged by the company, through an unstated concept of an ‘Incremental Biodata’. This dynamic process forces each employee at PVMI to take stock of additional skill-sets thus obtained, to enrich and enhance the experience and competence with the addition of each year of employment in the organization.

The important aspect of an employee’s growth path is taken care of through the process of ‘role rotation’. At PVMI, people move from marketing to sales, from finance to supply chain, from supply chain to sales and so on. This movement across functions provides employees the opportunity to gain multifarious experience to gain perspective about the organisation on a larger platform, thereby helping them to grow in their careers. At the end of the day, being a global player in the FMCG sector, Perfetti Van Melle understands the existing need for organisations to recognize the importance of taking care of its people and their aspirations. Focused training, role rotation and encouraging cross functional teams go a long way in affording a much greater experience to an individual, adding huge value to the concerned person, because that gives him an opportunity to test his knowledge in other functions as well, while giving them the perspective of what other people do and appreciate them. This wholesome experience is able to create a much stronger sense of commitment towards the organisation and employees stop looking at their jobs as only a means for getting paid. When the organisation’s culture supports a system, which focuses on a substantial change in perspective, issues such as attrition and retention assume less significant proportions than they would have otherwise done.

(End of Rajlakshmi Saikia column)

Which club’bing could take you this high?
One of the first movers in ‘customised air travel’, Club One Air has plans to revolutionise air travel across India

(column by Angshuman Paul)

“Factional ownership?!?” If you hadn’t heard of this term till now, be confident Club One Air would make this and the term ‘customised air plans’ is the buzzword of air travel industry in the coming few years. So what does factional ownership really mean? Does it mean that you might end up ‘owning’ an aircraft? Astonishingly, the answer is yes! At least, a part stake in a swanky flying machine! The concept of aircraft ownership or fractional ownership has existed for sometime in the West, but it’s only now that the booming Indian economy has given birth to hundreds of nouveau moneyed corporate honchos, who have the wherewithal and the luxuriant gumption to partake of this service. To cash in on this demand, Club One Air started its corporate journey in 2005. “Nobody in the country was into this business of fractional ownership. There were big industrialists who owned an aircraft; but many of them couldn’t even afford time and funds to face the hazards of owning an aircraft. Moreover, one might need an aircraft for only certain days, and the remaining time of the year, it might be sitting idle. So to manage all these issues, we introduced the concept of fractional ownership,” reminisces Manav Singh, Managing Director and the man behind Club One Air.

After a not-so-‘airy’ beginning, Club One roped in premium aircraft models like Citation Jets from the world-class Cessna family. Club One further diversified into offering even helicopter services. “To sustain our position, it becomes necessary to add value to our services; (and) rendering our services ‘in time’ has enabled us to create a loyal customer,” shares Manav. But as infrastructure improves and more and more private aircraft players come in, will commercial air passenger traffic be adequate to address Club One’s profitability objectives? Manav acknowledges, though with debate, “There are 7000 commercial aircrafts in the US; but customized aircraft services still constitute a popular market. India has 200 commercial aircrafts, which are connected to only metros. But then, which of them is actually connected with the rest of the country right now? Of course, we’ll have a market.” Club One’s current fleet strength of 11 aircraft may sound average, but one has to see this in context of the company gearing to have presence in more than 20 places across the country, with an exorbitant 100 flights by 2011. Club One started venturing into other segments. Recently they introduced consulting services for high net worth people wanting to buy aircraft! Clearly, to Club One goes the first round, especially with their new model of part ownership. The fact is also that the low-price model that other carriers have been trying has only ended up in huge losses for almost all of them. So does this combo guarantee success? At least factionally, one might argue, eh?!

(End of Angshuman Paul column)

Mall’adroit goals... and lost causes?
They say the mall bubble will last forever; we say the bubble is a myth. It’s no more about ‘Who dares, wins’... it’s ‘Who dares, sins’!

The year was 2002. The city centre and MGF malls had just begun to shape up Gurgaon as the next millennium city. From being just another metro suburb, Gurgaon was gearing up and digging hard to register itself on India’s map, and malls were becoming the face of this transition. The youth discovered a new ‘time-pass’ place to chill out. Businessmen and the working class got more options to have their meetings. And ladies were happy to find a new destination to head to, far better than their tacky downtown joints. For all of them, it was a completely new experience. A new experience of watching movies at multiplex movie halls, dining at uber restaurants, spending time at coffee shops, and of course, a new experience of shopping! Well, at first developers were just thrilled to see consumers – who were waiting for a change in their lifestyles – barging into their mega-stores. The crowds increased, parking spaces vanished, approach roads to the malls had the mothers of traffic jams, and what not. Weekends saw more security being employed to handle mob-like sizes of shop revellers. The nation got introduced to new techniques of ‘shop lifting’, and newer more introduced to ‘stop lifting’! Economists found more fashionable jargons – footfalls being the most famous. And as a domino effect, after seeing the high attraction quotient for crowds, more and more entrepreneurs started introducing newer and newer malls. Consequently, Noida, Gurgaon, Ghaziabad, Delhi, Bangalore, Mumbai, Kolkata, Chennai, all saw the trend spitfiring up. Ernst & Young, A. C.Nielsen, and a plethora of other consulting firms vouched failsafe for the fact that as the organised retail market was not even 2% of the overall market, malls had everything rocking for them. The more, the crazier! All in all, the mall mania seemed to be thundering up like nobody’s business. But what about actual sales? Did anyone care to track how many footfalls actually got converted into retail purchases? Did some consulting firm even worry about comparing whether, with the unbelievably high real estate prices, mall sales were actually giving a return on investment? Uhh ohh... Is that a stunned silence we hear on the other side of the answer tube? Recent times have clearly been a reality shock for many of the entrepreneurs and shop owners who have invested in malls. And the biggest shock has been more a cultural one, what with industry players belatedly realising that a humungous majority of mall visitors enter malls simply for the entertainment experience of it all, rather than to go about purchasing goods and services. Think about it. What’s the cheapest ‘outing’ option for a wholesome handful family on a weekend afternoon in the heat of a killing summer? Let’s go rock the air conditioned malls baby! Clearly, the mall mania was restricted to playing host to hordes of ‘junta’ visitors and was never on a mode to churn out real moolah, and today, even small towns are going through the same cyclical theory titled mallmania- gone-bust!

Footfalls or foolfalls?

Honestly speaking, there have been a few profiteers in this great game. While the charm of seeing global brands got the masses in (walk into the Westgate mall in North Delhi, and you’ll see world-class brands like NEXT, Bossini etc), rather than investing a few thousands to purchase branded clothing goods or accessories, the crowds hit the restaurants and movie halls (wherever available) with a vengeance. B grade eateries and C grade movies started seeing full houses. But more honestly speaking, the last time a whole industry went globally bust was in the early part of this decade, when dot com companies depended on eyeballs under the presumption that with more people visiting their websites, more purchases would automatically happen. Billions of dollars were lost globally in the consequent massacre of dot com companies. And now, the ‘footfall’ theory of malls is starting to bear extremely dangerous resemblance to the ‘eyeball’ balderdash spun on us earlier. And now, according to Technopak, about 600 malls will be built in India by 2010 and out of that only 50% are expected to make profits – there is no need to guess the fate of the other half. In the recent hallmark pan-India study conducted jointly by 4Ps B&M and the Indian Council for Market Research (ICMR) across the metropolitan cities, close to 2000 people were asked questions related to their affinity for the mall culture and also about their shopping habits. The findings were shocking! When quizzed about their favourite shopping destination, a meager 18% people named malls, while a significant 40% respondents liked to visit only individual showrooms to make purchases. The survey also highlighted the fact that about 43% people visit malls for only watching movies and eating food. Nilotpal Chakravarti, Retail Analyst, Springboard Research berated to 4Ps B&M, “Malls are a leisure activity over weekends, and many middle-class Indians are still hesitant about spending in malls because they think prices are higher here. The percentage of visitors who turn into shoppers is as low as 15% in Indian malls.” With 65% of India’s population being less than 35 years, it’s clear that the youthful crowds are trooping in, but cash registers still aren’t ringing. An analyst on the panel of Pantaloon shared worryingly with 4Ps B&M, “Yes, there are high footfalls in malls; but actual shopping does not take place. Malls are not cheap and they actually provide more expensive stuff...”

The 1st cut is the deepest...

To make matters worse, profit margins for this industry for the coming two to three years, according to Namita Chhetri, CEO, ICMR, “will fall from the current 30%-40% to as low as 12%-20% (as per Knowledge@ Wharton).” She further spouts to us, “According to the damning finding of Wharton analysts, because of over crowding of too many players in this business, a killing 70% of the malls will horribly fail the test of time.” Prakhar Sharma, Retail Analyst, CLSA India, ruthlessly vindicates this point to 4Ps B&M, “Yes, real estate costs have increased substantially and even middle level employees charge a high salary. It is difficult for small retailers to survive in this scenario...” Even Krishna Kant, Director (Technical), Era Landmarks, supported this thought process to us, “Seeing the recent spurt in the real estate market, one has to extremely selective in choosing the location of a project.” Attracted by the limelight of the mall culture and befooled by the increasing footfalls, small retailers got entrapped in the mall mania and now, ever increasing real estate prices, maintenance charges and minimal purchases inside the shops have really pushed these retailers to the final wall.

The 2nd cut is the deepest...

To the credit of statistics, it is also true that organized retailing in India is still at a miserable 2 to 3%; and more than 99% retailers function in less than 500 square feet of shopping space. Then why is it that malls in a majority ‘will’ fail? The reason is not only increasing costs, but as the previously mentioned Wharton study portends, increasing competitive pressures as well. Lee Iacocca, the most respected ex-CEO of Chrysler Corporation, who is credited with single handedly turning around the Detroit major, writes in his world famous autobiography about his dad who always advised him that recession or no recession, the best business to invest in is the restaurant business. We take the liberty to expand this definition. Unless outlets have a focus and a target market (rather than being ‘mass’ oriented), chances of being successful would be slimmer than a dietician’s delight.

Sadly, Indian malls lack the concept of store differentiation and brand building as they have till now focussed only on location and ambience tricks. Consider this. How is a TDI Mall different from an Ansal’s Plaza or a Spencer’s Plaza...? You got it! One is as good, or as bad as the other. To this Analyst Prakhar Sharma of CLSA is vitriolic when he comments to us, “Malls don’t have a positioning strategy like products have.” Jones Lang LaSalle Meghraj’s India Retail Report 2007 blasts out the same concept, “As the market grows and matures...at one end of the scale, the market is seeing growth in large one-stop malls, combining mixed use concepts – eating, multiplexes, entertainment and infotainment...”

Will top players – Tatas, Rahejas, Piramals, Goenkas, et al – pave a different positioning route for malls? Creditably, new organised retailers such as Reliance Fresh, Essar Mobile, Subhiksha, US Dollar store, Reliance World, Big Apple etc have set their feet on ground with clearly differentiated positioning strategies and unique business models. While some of them are focusing on providing products at lowest ‘Walmartish’ costs, the others are focusing on breaking out of the ‘mall’ space and converting into neighbourhood mega shops, as Pantaloon analysts confessed to 4Ps B&M, “There will be a high growth in neighborhood stores in India rather than large format stores...” Hmm, are they sharing their own future strategies? The new big gies entering the industry are clear that while on one hand they want serious shoppers, on the other hand, they do not want to incur high costs that are inevitable at malls with retail, maintenance and personnel costs cutting them dry. Jones Lang LaSalle Meghraj’s benchmark report throws up a whopper with the statement that “traditional ‘high streets’ will continue to be the mainstay of the Indian retail scene.” In fact, in an eye popping revealing interview (pardon us for the expression, eh), Sharad Mishra, Marketing Communications Manager, Ansal Housing and Construction, accepted, “We are not planning to expand into malls but into residential buildings in NCR. We can’t say that malls have lost out on sheen but malls have lost the all-needed cream...”

PLTs versus PLUs

In other words, People Like Them (PLTs) versus People Like Us (PLUs); the classic refrain of those handful of people going to malls to really ‘buy stuff’ and getting highbrowed about PLTs spoiling the upscale atmosphere. The pathetic fact of it all is that a majority of Indians are, in one word – poor. And till the time India as a nation ensures that PLTs slowly but surely get converted into PLUs, there’s no ghost of a chance that industries can be profitable. Look around – from automobiles to cold drinks, sectors after sectors are suffering smashing losses, despite having top line growth. In a US city, people drive down miles in their cars to the outskirts to visit malls like Wal-Mart. Would that ever happen in India? So, when was the last time you went across the city to specially visit a specific mega-mall? When? A long time back, if at all? But then, we might be proven wrong. Indian governments might get the equation right & might force the growth multiplier down the throat of the hundreds of millions waiting for years for India Shining to show up. But like we said, till the time that happens, we’ll be happier reading Iacocca’s autobiography, and believing in his father, and opening up restaurants after restaurants!

Feel the power of one (brand)!!!

The rise of ‘single brand’ stores like Reliance Fresh, Subhiksha, Big Apple et al (the Power Retail as we call it!), thronging every nook & cranny of this country (needless to mention the rage that Reliance fresh has created across the nation from day one) are the new age symbols of a progressive Indian middle class (not the coying malls!). Moreover, the government’s approval for FDI in single-brand retailing pumps greater interest into the whole category. These Power Retailers prefer to shine as stand-alones rather than take refuge of the showboat malls. The reasons are manifold. First and the foremost: a braggadocios showroom in an elephantine mall may fl ock some casual wanderers but no serious shoppers. Secondly, these power retail outlets are targetting the masses and playing with volumes. And that’s why they always prefer to be in a neighborhood location, rather than opting for malls that are mostly located either on the outskirts or in the suburbs. Bingo! So staying as close as possible to your beloved (customer) is the strategy! Ask yourself, when you have to shop for basic necessities, you have Reliance Fresh, Subhiksha, Fabindia, Big Apple (and very soon Bharti- Walmart too!) that offer superior quality at competitive price and located at just half-a- kilometer from your house, why on earth would you travel for a good 10-30 kilometres to purchase what you need?!?! I know, you’d not... and that’s the primary reason for the mall-retailers to worry over. For most Indians still love to go window-shopping in an AC environment... So forgive us dear mall-retail champs, the malls are still no.1 when it comes to window-shopping!!!

When standards decide the winner!

In the brutal mad race to expand the retail formats and going crazy to construct new shopping malls, many developers and retailers, with the gush of adrenaline are horrendously forgetting the deep-seated strategic logic behind the whole concept of ‘malls’... According to the Jones Lang Meghraj Research, a mind-blowing 90% of the prevailing and planned shopping malls fall below the international standards in terms of specification and design. Mall specification is poor in the sense of pedestrian access to the malls, linkages between the floors, amount of space allocated to the food courts and most significantly, the lack of adequate parking provision! One of the biggest threats faced by the Indian malls is the poor quality of surrounding infrastructure, lack of integration with the neighboring residential areas which often lead to congestion and cause inconvenience for both consumer as well as the resident. As more and more malls sprout up in various locations across the country, the players should keep in mind that their has to be in alignment with the boom in other sectors of the economy. For starters, keeping in view the stupefying growth in the auto industry, ensuring adequate space for four-wheeler parking is mandatory... and there are many more such issues to be dealt with! Furthermore, the lack of availability of property at suitable places and that too at an affordable price will prove an area of serious concern for the developers as well for the retailers. All-in-all if we were to predict the future of the seemingly booming mall market, all we’d say is – in the end, there’d be just a few winners & ‘many’ big losers!