Dialogue the Holy Grail of Retail Best Practices for Management of Retail Business
Panelists: Abbas sherazi, chief Merchant services Corporation
Tausif Hassan, CEO sales Floor
Murtaza Ali, Director Jafferjees
Asim Hussain, CEO Agro
Mansoor Nawaz, COO Mausummery Textile
Moderator: Dr Arif Iqbal Rana
Dr. Arif Rana, Associate Professor LUMS: we will start will abbas sherazi, he is chief merchant at service sales corporation. As a regular customer at service, I have observed that things have changed in last few years. The chances of finding the desired product in service store have gone up in the last seven eight years, and it has something to do with the whole area of merchandising. Merchandising is all about stocking your stores according to your customers needs/demands. The question I want to ask him is how they were able to achieve this? What were the challenges/issues?
Abbas Sherazi, chief Merchant Service Corporation: I have been in service for 15 years. My core area of focus has been merchandising and supply chain management, and definitely some IT as well because supply chain and IT go together.
When I joined the service sales corporations there were a couple of hundred stores and today we have about 500 stores. It’s a large footwear industry; we have got a very large whole sale network, probably one of the largest. The journey from being a small/middle size company to a large company has had its own set of challenges. Some of the issues that came up centered on the complexity of the operations, team building and the degree of centralization.
Coming back to merchandising as Arif Shaib mentioned, ten fifteen years ago, there were lesser chance of finding the required item in a store. Either it was displayed but wasn’t in the stock, or the right size wasn’t available and so on. But now store experience has improved a lot, and we have a sales forced of about 2000 salesmen. During the entire process of growth we tried many things. Some worked and some didn’t, but the learning has been incredible. Here I will give you just an over view of process and touch upon some of the areas that we fixed.
First and foremost I would like to mention assortment planning. Assortment planning is about deciding which sales product goes to which store. At the time when I joined the company, assortment planning was done locally. This means we believed that the store manager knew better than anyone at the head office about what to sell at different stores. So we would present him the list of all the products & he would go on ticking the items he would like to carry.
With assortment planning spectrum would be form one assortment for the entire country to different assortments for each store.
Both don’t work. If you have one assortment for the whole country you will fail in many markets throughout the country, especially when you are
If you have the wrong assortment for the wrong store what you get is stock loss on certain items and a lot of over stock as well. Besides, you also lose your customers.
Scaling up, because markets are different and customers are heterogeneous. And if you decide to go for a different assortment for each store, it can become a nightmare to handle while people sitting in the centre will have no idea about what’s going on. Moreover, the degree of control that centre has and the consistency that you present to your customers also go haywire.
Whatever approach you adopt, the fact remains that assortment planning
A typical customer will need different types of shoes for different areas of his life
Is key decision. Because if you have the wrong assortment for the wrong store what you get is stock loss on certain items and a lot of over stock as well. Besides, you also lose your customers.
With time, data accessibility became tremendous. Now we were getting data electronically by store, by size, by items on a daily basis. The challenge was now to analyze data and make it actionable.
On the supply chain side we needed more people at the centre to take decision on the data thus generated. So we included merchandiser and planners in the team, before that we hardly had a management team but now we had a lot more people on the management to see what goes from centre to centre to each store.
And of course we changed the structure/design of our supply chain. Previously we used to have a direct store delivery system in which vendors would send shipments directly to all the stores.
It was simply unmanageable because the flow of 70 or 100 vendors to the 400 or so stores was too complex. So we needed a central point of holding, a centre within a centre: a massive, state of the art warehouse from where the flow of products from the vendors to the stores could be managed.
The idea really was to somehow base the decision of stock allocation to stores on actual demand data. And because with E-Boss demand data was coming in, we were able to do it.
Then there were challenges of branching out into fashion retail. With tremendous experience in consumer goods but zero experience in fashion retail, this again was a massive challenge.
We also changed the way we managed our relationship anymore, now it is about a mutual sharing of plans.
The final and most important point is that none of his had been possible without a fantastic team.
We invest in our people by sending them for training/ conferences to different countries. And this has enabled us to bring in a lot of best practice from abroad.
I finally have to add one thing on the system side that we have been able to build in-house, again this meant massive change management. And it pretty much sums up what we have done.
Dr. Arif Rana, Associate Professor
LUMS: Tausif Hassan has been involved in retail throughout his career, and currently he is doing his own retail consulting firm. But he was also with Service Corporation as their CM HR and handled their operations area as well. And the question from Tausif Hassan is: when you are handling a retail outlet or retail store or chain with about 2000 sales people, how do you make sure that your sales people give your customers an experience that you want them to give to your customers. So if you could shed some light on the whole area of customer training, sales force training, sales force incentives, and how do you manage, control and motivate your sales people? And if you have time I would also want you to talk about SAPAMEC, a customer service programme that you introduced there.
Tausif Hassan, CEO Sales Floor: I was heading the HR department of service sales corporation of Pakistan, and before that I was running the service store operations, and I have seen service grow from 275 stores to 500 stores. My areas of expertise are sales force management especially in compensation management and training and development of people by bringing in the aspect of behavioral science. Focusing on hoe people change and what react to.
When I was in operation I had a big challenge of transforming a 2000 plus sale-force. There was a company with a head count of 4500 people, with 500 people at the head office and 2000 people scattered all over Pakistan in 500 stores. There was a big challenge of transforming 500 stores managers and 2000 sales staff. The biggest question out there was how to bring the world class customer service into our door step. How we transform people.
I am shocked by two facts when it comes to customer service in Pakistan.
One, there is absolutely no concept of customer service. You go to the board, you go to the CEO and all they want to talk about is GMROI, GMROFF, SUPPLY CHAIN, or merchandising. And the second shock for me is that the retailers themselves set a very low bench mark for their own sales staff. It is amazing. Customer service is the last thing on their agenda. I had to change this mind set. The big
The retailers themselves set a very low bench mark foe their own sales staff. Customer service is the last thing on their agenda
Challenge was that before changing the 4000 people I had to change the 8 people who were sitting at the head office. It was about transforming the management team about what customer service could imply in terms of sales. It is about quantifying the programmes and breaking it down into different steps.
And the first step is: how to create a sense of urgency.
It is not about creating a sense of urgency in the sales staff, or at the operations level. It is about creating it at the board level. You have to convince and change them first. And can’t show it in theory but have to run a sample test, quantify the results and show what it means in term of sales/profit. So I created a programme, SAPAMEC, with a 40 plus years retail experience. It is a customer service program that you can quantify.
After they agree and say lets go and do it, the biggest challenge is now that you have 2000 people who are being paid below the poverty line, almost at the poverty line. And you have to transform these people who are working on very low salaries and wages, and teach them who to act with the customers. So it started out by creating a sense of urgency first at the head office and then transferring it to the field staff as well. To achieve this, head office people have to communicate their vision to the field staff and convey what it means for the company and how it is part of the corporate philosophy, ethos.
The next step is setting short term goals and celebrating small terms wins. The short term win have to be measureable. For instance, one way to measure is how many transactions per hours, another is how many customers a particular salesperson served in an hour, then you can have mystery shopping people sitting there as well. And you can build a questionnaire around it and start charting improvements. Once you start seeing and reporting the improvements, everybody at the head office wants to take the credit. So how do you measure it?
The way to do it is to start building measures and matrices with mystery shopping and all the other measures that I mentioned above. You can take two customers of stores with the same assortment and the same marketing and promotion and the study them for a
In Pakistan there are now international players and they have set a very high bench mark for customer service
Fortnight. You will see a substantial increase in the store where the SAPAMEC is being implemented properly.
So implementing our programme and transferring our vision across 500 stores and 18 districts was a big challenge. Another part of the solution was the building of excellence centre’s. At excellence centre’s you get these people together every 15-20 days and you hammer them on the importance of customer services programme and also how it translates into more sales, more returns, more conversion, and thus more money for the sales people in service.
There are two ways to devise a sales structure. One is fixed salary and the other is big portion on variable. And if the big portion is on variable, these people will see the difference once the store sales go up because it will translate into more money for them. So you start building excellence centre’s and start training your people.
After these intensive trainings you start promoting from within. Among 2000 people you have plenty of talent and you just need to spend time with them to find the people who have the spark, and the steadiness, who can influence others and who can speak well. There are so many other measures that you can apply for talent hunt.
We only had to choose 18 people to build 18 excellence centre’s all over Pakistan. And these people are specialized to carry on the training programmes across the country.
And one more thing that I want to touch upon is why customer service is important. Obviously I am very passionate about it. In Pakistan there are now international players and they have set a very high bench mark for customer service. One really has to try and make customer service a big component in the organization. Bringing customer-service-centric mentality to the head office and rolling it down all the way down to 500 stores is how it was done at service, and that’s the story of SAPAMEC.
Taking a programme like SAPAMRC and implementing it all across is fine. But if you have one sore with 5-7 people working there then you need to look at them individually. There are analytics available which you can apply to find out who the really good salesmen are and what makes them good. For this you need to spend time with your people. Thus one piece of advice for business owners is: start spending time with your people, start identifying who are the best salesmen and what gives them an edge, and then takes those concepts and apply to the weak ones.
Another important point is recruitment of your people. Your people are the company’s foot print and the foot print is extremely important for any organization. Thus it is crucial to have the right people on board, and get wrong people off the bus. Sometimes letting go of people is quite painful but you have to go through that pain.
Dr. Arif Rana, Associate Professor
LUMS: When we talk about retail, we need to think about the value composition of our customer, about who is our customer and what are we trying to work for. We can compete on value, on variety, on convenience, or we can compete on experience. Recently, there was an article in Tribune ABOUT Jafferjees and it said it was all about experience. When you decide to compete on experience, your people or sales staff is the most important machine. The question to Jafeerjee thus is how do you make sure that your customers are provided the kind of experience you believe in?
Murtaza, Director Jfferjee:My thinking is quite radical; it’s not the mainstream textbook thinking.
After this conference is over, go to any store, restaurant, or a baber shop, and experience what sort of customer service is offered to you. Close your eyes and think about it: what exactly do you want to experience over there? Do you want some change in aroma or music? Do you want a more personalized service and then leave. Go back and then walk into your own retail store, and you will have some idea about what you need to do at your own store.
One important thing that was discussed here is the concept of mystery shopper. All retail stores do require mystery shoppers. You need to give them a list and tell them about the things you want them to look at and report back. Once you have details through the mystery shoppers then call salesmen and discuss what happened.
How we do it at Jafferjee? I confess it is a very intimidating process. When sit in the conference room it is slightly intimidating. You will be thrown and bombarded with questions that you may not have prepared for. Here I will give you a brief overview of the entire process of hiring our staff.
When a salesman comes to us looking for job, the key thing we look for is not the educational background. What we look for is how good his listening skills are. We gauge and repeat what is being told him. And if his listening skills are not good we don’t keep him. We believe it is very important for a salesman to listen to the customer and talk less. So that’s the first thing we look for during the job interview.
Next, the person selected after the interview has to go through a three- week training programme.
There are very specific training programmes geared towards sales team, IT people, E-commerce people, or the logistics. No body else but the senior management takes care of these programmes. I, my father and my uncle specifically look at the training programmes of such individual because we want them to emulate us in the near future.
After the three weeks are over, the individual goes for a small test/quiz. The test is designed to see how well a person can perform under pressure. For instance, sometimes we end up timing certain individuals to measure how quickly they can wrap a gift. You have to wrap a small gift within a minute and if you can’t, you have failed the test. The training then involves learning about the products. They go through the catalogs, gain knowledge the entire transfer system, packing system, etc.
After the trainings are over and the person actually passes tee test, we move him to the show room. If they don’t pass the test we don’t keep them.
When they move to the show room, for one month they are under vigilance and go through a formal training from the manager ant the assistant manager. They teach him things like how to talk to the customer, how to stand in front of the customer, what are his duties, what are not duties, etc.
After a month we personally meet the person wherever he is, be it in Dubai or Faisalabad, and ask him a couple of question. And once we have done our evaluation, the mystery shopper goes in. And if the mystery shopper recommends the person, he is hired.
One thing that I have learned is that at the end of the year you have to get rid of the last 5 percent of your sales staff that’s not performing well. You can’t just go on dragging somebody who is not competent. You have to let go of them. It is painful, and we try to make it easier for them by giving them cash certificates and recommending them to other companies.
However, having said that, we also invest in the people who are talented. We train them, can also send them abroad. And, as Adil Moosajee has
All retail stores do require mystery shoppers. You need to give them a list and tell them about the things you want them to look at
Pointed out, people grow from within. When you trust them they show you the performance you desire. For example, one of our salesmen has been with us since 1985 and he is now the manager of one of most prestigious stores Jaferjees.
You have to personally take an interest. Don’t make this into a job, it should be something you love doing. I personally decide what kind of music to play in the stores, what sort of aromas would create a particular ambiance, etc.
These are the little trade secrets that I shared with you, so go for it.
Dr. Arif Rana, Associate Professor
LUMS: Asim Hussain has been doing retail all his life. He started with KFC, and then worked with Servaid, which turned around while he was there. Now he is CEO of Agro. Rural agriculture is a different market, so if you can highlight what are the differences, what are the challenges of doing retail in rural areas?
Asim Hussain, CEO Agro: My highest has been at KFC and that’s where the foundation of my career was laid down in franchise and retail development. As far as Agro is concerned, I love my work. It is interesting and expandable. We are in agriculture business, and this business is generally unknown to the audience in this room. The concept is to form a one window operation for all the agriculture inputs, and subsequently to buy produce when it comes in the market.
So we are both the seller and buyer at the same time. It’s the second year of the operation and we are operating with an open mind. Here I would not go into core business function but would just narrate the formal story.
The people who are familiar agriculture will understand that it’s not an easy job. When I moved from the past job and entered his market, I had some personal corrections to do. I told myself that this is going to be different and challenging. That was a good starting point. When you go into a job or a business with an open mind it allows you to be somewhat fearless and also leverage on the past experience. I started to change myself in the sense of establishing a personal and professional work balance. My family was very supportive and is very supportive.
For the lat one year, 70 percent of my time was spent in the field. It was about changing my routine and travelling a lot. It was about starting at somewhat early hours, like 6:30 in the morning, that’s when our field force starts working. Sometimes, personal change involves disbelieving that your past is going to be your future. Our business is a one window operation where the culture is different, market is vague, and people think differently but want to excel in their lives. So we started with believing in this thing. But this belief wasn’t enough; because a belief not backed by action can turn into a philosophy and remain just that. So we started thinking how we can bring clarity into this business.
There was a legacy of the past. From a larger perspective we didn’t want to challenge it publicly but we thought we should learn it all over again, and we started teaching ourselves and growing together.
The first question we needed to answer was: what is the clarity of this business? A one window operation, if it is E for you, can be technology based, or it can be hardware, software based. We realized that it had to be about products, services and, obviously, margins also. Moreover, in this industry the power play is based on science. And there isn’t just one product that you need to focus upon, it can’t be on vertical business. We sell fertilizers, we do business in products, we buy products, and we manufacture products. We also sell micronutrients and fuel. Once we became somewhat clear about one window operation and what it would it entail, we focused on the area of quality. Farmer’s pride comes from his economic social cycle, he wants his crop to do well and he wants quality. At the same time, as things became clearer, we remained fearless. When you have to play a bigger match, you need to take certain decision without fear.
Next, we realized that in the 200 year old industry we could neither earn in quality nor on trust, and we needed to build capacity. When we went to the market to find salesmen for our particular model, we found out that there was only a pesticide person or only a marketing person, or a fertilizer person. Thus clarity of this model and building capacity for this model were, and still are, our major challenges.
After that we went to another conventional point, that of communication. Here we learned that emails, conferences, conference call, etc., simply don’t work. People in the field, even the ones at the managerial positions, don’t read.
Along with the communication
When you have to play a bigger match, you need to take certain decisions without fear.
Aspect, we started looking at our hiring polices. We decided that we will hire for the right attitude and let go of the wrong people.
We also became clearer about the fact that ours is an integrated product-to-service selling point.
If you sell fertilizer to someone at one point, at the next stage his demand will be pesticides.
In a one window operation you have to run through the entire chain. It’s a business where one product marries into another product, and one service marries into another service. Thus it becomes all the more important to simplify retail for our team and the farmer.
Pakistan is probably 50 years behind on an evolutionary note of agricultural economy and on the whole practice of agriculture and productivity. We think that being 50 years behind is an opportunity for Agro.
If we manage to put the pieces together, i.e, clarity, capacity building, communication, we can build a viable business model and create a service based industry. Our model is not about one category. It is about servicing the customers, being true to the customer and yet imagining a lot of things. It involves imagining and delivering. We keep on investing in these two aspects.
When I meet people I don’t wear suits. I wear shalwar kameez even in board meetings where people come from different parts of the world. We want to tell them that it’s a Pakistani hardcore expandable progressive business. When I meet people I don’t meet them as CEO, I meet people from the lower farm level people to the CEOs and I try to learn from them. If we look at our business in terms of similarity with other businesses, there is much. There are common aspects of clarity, capacity building, and communication, but there are also the elements like culture and the market which make our business different. The good part, however, is that the size of economy for this business is much bigger than the sum total of all the business present in this room. Besides, it is a highly credible market. Defaults by the banks were 23 percent for the last one year but, interestingly, defaults by the customers and the market were zero percent.
When we talk of our 2013 agenda, we
If you sell fertilizer to someone at one point, at the next stage his demand will be pesticides. In a one window operation you have to run through the entire chain
Talk of capacity building, product margins, distributions model, and distribution model expansion. It’s a struggling company but our belief is that it’s a doable business and in the last few months we have seen many breakthroughs. Our promise to our customers, our shareholders and our society is that we will keep on improving it.
Dr. Arif Rana, Associate Professor
LUMS: There are a lot of students that fear professor, but there are some students that professors fear and Mansoor Nawaz was one of them. He joined his wife’s family business, Mausummery, last year and ever since he joined something happened and it started growing. What are practical on the ground issues that you faced? What are the problems you encountered from one to 20 outlets?
Mansoor Nawaz, COO Mausummery Textiles: Mausummery has been around for 15 years. It is basically a branded printed cotton lawn. It’s a phenomenon that, I believe, will put Pakistan on the world map of textile industry first by developing the local economy and then by increasing our exports. It is one of those rare industries where we have about hundred and 50 brands, and a single brand may have a shelf live of about two-three weeks. Marketing involves hiring a brand ambassador, holding three exhibitions in Karachi, Lahore, Islamabad, and you are done. Then on the other side of the spectrum you have the big voice with a 12 months shelf-life and about 300-400 designs in the lawn market and where planning is done six to nine months in advance.
There are some challenges that we all face as an industry. For instance, new entrants to the retail industry need to ask one key question: where to sell the product? Property business has boomed.
If you want to find a shop at M.M Alam road, you need to have at least two to three million. I measure my business on per square foot basis, and the cost is getting higher every day. You will face issues in the near future when we will simply run out of property.
In the last fifteen years we have gone from having a single exhibition in Karachi (expo) for three days and servicing about 8-10,000 women, to having 20outlets. Times have changed. We are in the process of launching other twenty stores by the end of January ant another ten after that.
My brand allows the tier-two businessman to come forward and invest in my franchise. The question is where we are going if we don’t have enough property outlets. The biggest challenge is getting enough investment into shopping malls. Karachi has done that with a certain level of success. I am very proud to have 15 hundred square foot place at Dolmen mall which is the largest mall in Pakistan. I also have a single, 12 feet wide counter at Model Town Link road. We believe we also need to create a certain kind of atmosphere to service our customers who would like the ambiance and the intimacy of a 12 feet counter where the salesman can show you everything. So it is that tightrope that we walking. The pivotal point is where the next shopping mall will be built, when we are going to start changing the customer’s shop visit into a visit to a family destination where a customer comes with the family and shop in the entire mall.
In the absence of that there will be again more strategic partners. We see small spurts of small shopping malls being built in cities like Lahore.
The second trend is what I call the democratization of your national brand. People from Sheikupura, Gujranwala, Faisalabad, and other smaller cities will no longer have to come to Lahore for their monthly shopping because these brands will be available in their cities. There is now a democratic landscape out there. We see a lot of growth and we see a lot of franchise coming up. So the Entrants today and in the future in these trades will need to develop those relationships in these tier-two markets.
We have visited the shopping mall issue, and we have seen how your brand needs to be democratized and moved out into the tier-two market.
The next issue that I want to talk about is developing partnerships concerning the various aspects of your business. Fortunately, I have never experienced any dearth of business partner. I have had third party partners offering advertising services, social media services. But generally speaking, as soon as you launch a retail brand you will see them all disappear. You will not see the top five or six advertising agencies come to you for business because their business model is more geared toward FMCGs.
There are other critical issues related to expansion that you need to face at
My brand allows the tier-two businessman to come forward and invest in my franchise.
Some point in time. For instance, you have to make decisions about who you are going to partner with in terms of your location, who’s going to be your next photographer, who is your next promoter, your brand ambassador, etc,
Now CR. When I first went to Aziz sahib I told him that I had spent a lot more in developing my own sales software than what he was charging me. I have my CR model that I had to develop myself because there is no sustainable, reliable delivery partner out there who would like to offer the kind of service I want. That’s another issue.
Market research: It is now possible to partner with a few agencies that are doing online business.
So you can now mirror what FMCGs are doing. You can talk to consumers online and get the statistics.
Unfortunately, brand managers in the retail world of marketing don’t exist. It is a career that has been created out of default. I think this issue should be taken up at the curriculum level by the academia. We, however, invest in RA by investing in our students. It is our second year of the scholarship programme for students. Moreover, we have hired young graduates from colleges and universities or graphic designers and other professionals
HR recruitment. It is great to expect salesmen to manage your customer. I would like to know how a salesman is going to use his data base to make those hundred calls a day ensuring that the customer should visit my outlet three days a month. And what safeguards I need to ensure that he makes those hundred calls I have yet to find a partner who can offer off-the-shelve solution to managing my core staff. So there are many challenges out there. First we need to understand them and then we can go about solving them.