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Case in point 3 - New distribution channels at The Spa Group

We discuss two new distribution channels that The Spa Group launched as a means to reach and serve consumers.

  • The Spa Group deepened relationships with clients through the non-retail channel (NRC). The NRC requires that staff visit customers in their homes, display products (e.g., dinner sets) and even leave the products there for a few days until customers have made up their minds to select and purchase products.

    • While the NRC has limited capital expenditure involved, per manhead sales are greater than that of the boutique.

    • Members of the NRC also develop deep relationships with families they visit and serve. In fact, customers typically request NRC members to help them with other services

      • (e.

        g., buying tickets for Broadway shows, etc.). In effect, Spa has developed an informal luxury concierge service for clients.

    • The Spa Group has 11 NRC channel groups; established in 2006, Spa worked with staff to teach them how to interact with (often very affluent) customers, maintain sensitivities, display product awareness and knowledge, etc.

  • The Spa Group, realising the future potential of digital marketing, established a digital channel that enables the company to reach customers through digital avenues (e.g., Internet, mobile phones, etc.). That said, the company understands that consumers place a high premium on privacy and therefore aims to communicate with high-net worth individuals in a non-invasive manner. Selected benefits experienced by Spa Group through the use of this channel include -

    • As customers’ lives become more stressful and busy, they will increasingly value their leisure time and will prefer not to indulge in in-person shopping. Digital marketing will enable customers to shop at their convenience and in comfort (i.e., from their homes).

    • Though the luxury market is nascent in India, Spa Group believes that launching a digital medium for selling luxury products will result in higher sales by 2012. (Source: Primary research interview with The Spa Group)

Specific innovation practices that retailers are embarking upon, as obtained from our primary research interviews, are provided below:

  • Creating India-inspired product lines - International brands are creating India- specific lines that reflect culture, religion, mythology, heritage monuments, etc. Tremendous efforts in terms of design, research and development are undertaken to ensure authenticity of work and detail for the products.

  • Offering private label products - Retailers want to create a total solution set for consumers and to that end, are creating private labels in categories without clear established market leaders. These retailers believe that business opportunities exist in creating private labels for categories without established majority market leaders. That said, these categories must be of appeal and interest to target consumers.

Strategic Issues for Retail CEOs* : Perspectives on Operating in India’s Retail Sector

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