Petrol – a commodity for just the rich?

Petrol – a commodity for just the rich?

What could be a better time to observe and study the Petroleum Industry than now? With the price of petrol soaring as high as Rs. 77.53 per liter, there has been quite a commotion in the city.

The Indian government had decided in the year 2010 to let the gasoline and diesel prices to be market-determined as the federal government seeks to shrink its budget deficit and help state-run marketing companies cut losses on selling fuel products at state-set prices. As a result of this, the petrol prices have seen a steep price growth. Some of the observable effects of this are : 

           1. Rise in inflation

           2. Private sector oil companies will have an increase in their margin.

Given below is the trend in the petrol price changes over the past couple of years.

DATE	PRICE(Rs. Per Ltr)
Sep 09, 2010	57.44
Dec 16, 2010	60.65
Mar 02, 2011	61.93
Mar 15, 2011	67.22
Jul 01, 2011	67.50
Sep 16, 2011	70.82
Nov 04, 2011	72.73
Nov 16, 2011	70.38
Dec 01, 2011	69.55
May 24, 2012	77.53

                                               

The state governments benefit most out of the price hikes as the tax that they levy on the petrol price increases. The customers, however, are gravely affected due to the price hikes, but with petrol having become one of the most inevitable commodities in the present day, they are not able to do much but to complain.

I had visited one of the petrol bunks to better understand this situation.

About the Bunk

I had visited the Bharat Petroleum outlet at Kallikuppam near Ambattur. The bunk was set up in 2006 having paid an initial caution deposit of Rs.2 Laks to Bharat Petroleum. Other operational and maintenance expenses had to be taken care by the dealer himself. The bunk has installed a total of 6 stalls, each of them having 2 petrol and 2 diesel outlets. It has provisions for 3 types of petrol: Unleaded, Speed and Speed 97 and two types of diesel : Normal and high power. I had spoken to the supervisor Mr. Chakravarthy, who explained how the underground tank has a capacity of 15,000 ltrs and they have an average sales of about 4000 ltrs per day.

Source for the Bunk

Their main supply is from Mumbai. From Mumbai it is brought to the Chennai harbor via cargo ship and is then connected to Korukkupet in Chennai using Petroleum lines. Tanker lorries then periodically supply to this petrol bunk from Korukkupet. Korukkupet is the supplier for most of the BP outlets in Chennai.

Sales Pattern

Two wheelers formed major portion of their customer base and as the petrol bunk falls in the way to many engineering colleges in Redhills and Surapet, college buses also formed a bulk of their customers.

Three notable things he mentioned are given below:

·      

       1.  Speed petrol, Speed 97 petrol and high power diesel do not sell well owing to their higher prices. The effects of these products are felt only upon continuous usage over a period of time and customers are not usually patient to see the results and tend to question its validity.

·         2. There is a newly built Chennai Bypass Road that now routes all the heavy vehicles to Andhra Pradesh. Before this Bypass was built, the dealer’s sales were almost 8,000 litres, double the current volume of sales undertaken, as the heavy vehicles that used this road, frequented the pump.

·          3. The pump made only a meager marginal profit on the sale of its petrol and diesel. Most of the profits come from the sale of lubricants. These lubricants are however harder to sell. These lubricants are showcased in the inner office room of the bunk.

Observations

Although the petrol price hike has caused a portion of the population to look at alternative sources of transportation like the public bus and the electric trains, fuel consumption by majority of the population remains pretty non-staggered. With this confirmation, the pump can work on other aspects of improving its performance and sales.

Following are my observations:

·         1. Considering the fact that lubricants bring more marginal profit, they could be placed in a more prominent place, like near the petrol pump itself rather than inside the office room. Also the staff members could be trained to recommend these lubricants to the customers stating that it improves performance and efficiency. 

                                                   

·        2.  Also, since the petrol pump is located in a fairly rural setup, it can implement additional facilities like an ATM that may bring about attracting more customers. (The nearest ATM from the petrol pump is almost 1.5 kms away).

·         3. The employees could be trained to be customer centric, customer friendly and courteous. This I felt is lacking, owing mostly to the rural setup. But with Ambattur developing into one of the newer IT hubs and industrial estates, the petrol pump should also grow with its environment.

The Nature’s CO – a natural way of rejuvenating oneself

Browsing through the stores of EA mall in Chennai, I suddenly got drawn by the sweet scent of Jasmine and lavender. I noticed that it was The Nature’s Co, a store that sells natural beauty products. The first thing that I noticed about the store was that there are no doors to the store so the sweet scent pulls in the passers-by into the store.

 The next object of interest was the name of the shop itself. Although the main ingredients of a soap do not change, when we see the word ‘NATURAL’ or ‘HERBAL’ , we get the feeling that these products are completely worth using and are totally harmless. Hence, the name of the shop itself creates a positive feeling in the minds of the customer.

The ‘PETA’ logo at the entrance explains that no cruelty was shown to any animals in the process of producing the beauty products. This feature creates a soft corner in the hearts of the customers. This turns out to be the USP of the store. To complement the above mentioned features, the colours of the products and the store were very soothing and light. The product categories- ‘Atmosphere’, ‘Earthborne’, ‘Foressence’, ‘Aquaspark’ and ‘Starrize’, suggest natural elements. These features seemed to support the fact that the products were indeed 100% natural.

I had a long conversation with Ms. Saru, the store manager who gave me details about the shop, the customers and the marketing strategies employed in general. She told me that there are currently 9 outlets all over India and they are expanding further in South India. The production unit is based in Dehradun. She informed that 60% of their customers are foreigners, 30% are Indian customers who already know about the product. The remaining 10% are the Indians who have the money to purchase but have no knowledge about the products. Customers are explained about the products and the company and the location of manufacture of the products. Many customers in Chennai find it enticing to know that the products have been distributed from the North. It gives an exotic feel to the product. The natural ingredients of the products and their benefits are explained in detail to the customers. The PETA logo is an added advantage.

Testers are made use of to demonstrate the products. They have testers for every product. This creates a level of confidence in the customer about the products because use of testers seems to be the seller’s way of telling the customers to buy it only if they like it.  This creates a feeling in the minds of the customers that the sellers are not in any desperate situation to sell off their products and they hold a high opinion of their products.

Ms. Saru also told me that they attract their customers by giving discounts on fat purchases. The price range of the products is Rs. 250- Rs.2000.  Different strategies are followed in different seasons. I noticed an offer at the entrance of the store. “FACE the SUMMER” – free 10 minute detox with a purchase of RS. 750/-. This is one of the strategies that they employ to increase and retain their customer base. Their peak sales are during holidays when people hop out to blow off some heat and spend some time in the shopping malls.

Mainly Mumbai records the highest sales closely followed by Delhi. In the other areas, more people still need to adapt to the mall culture. Nature’s Co has plans to open stores in Hyderabad as well.

She even showed me their website- www.thenaturesco.com. It was well designed and had all the information about the company and the products.  The attractive features of the website are that of ‘Cash on delivery’. This is a way of creating customer loyalty and promoting online shopping. In online shopping the middlemen are avoided and hence they can give out a share of the profits so generated by the elimination of middlemen in the form of 15% discount to the online customers.

 Another important feature that I observed on the site was the use of social media i.e. the Facebook, to spread awareness about the company and its products.

                                                                       I noticed that right next to this shop was that of ‘ForestEssentials’ and a little further away on the same floor was ‘Body shop’ which also sell natural beauty products, so I asked Ms. Saru as to how do they deal with the competition. She explained that their USP was that they support PETA and do not use even honey or milk in their products. As the vegan movement is slowly getting popular all over the world and 60% of their customers are foreigners, the PETA support factor gives them an advantage. The pro-green initiative they have undertaken also creates a feel good factor in the hearts of the customers that by purchasing products from Nature’s Co, they have contributed to the ‘go green’ movement.

Ms. Saru also told me that to ensure customer loyalty, they have even given out personalized gifts for women’s day and invited the actress Neha Dhupia for the celebrations because women form the major chunk of the customers (98% women and just 2 % men).  In fact, the products that are bought for men are also purchased by their wife or sister, as the men find it embarrassing to enter a store with beauty products. I noticed that there was a guy in the shop to help with the purchases but he did not seem to be well equipped with the product knowledge. While I was in the shop, a man around the age of 35 walked in with his two kids to take a look around the shop, but looking at the posters that showed just pretty women, he felt out of place and walked away.

I feel that they can expand their customer base by starting products for men too. Products like fair and handsome have crept into the market and men have showed great inclination towards such products. Hence Nature’s Co should start targeting men too so that when the ladies are busy buying their products, the men will have something to browse around and make purchases too.

                                                                             Overall The Nature’s Co follows a very planned and creative marketing strategy by making use of techniques like social media, purchase based discounts, season based offers, soothing ambience, open doors, PETA and pro-green initiatives, affiliation with celebrities and customer loyalty techniques like personalized gifts and gifts vouchers etc. I conclude my analysis by making a suggestion that by expanding into the men’s segment they will be able to make further profits and gain an edge over their competitors.

Srivani Thaduri
FT13480

Don’t be Banal..Take Some Risks in Formal Dressing

                   

As a person it is in my very nature to roam around the bylanes of whichever new place I visit. It was on such a trip in the lanes of Mahabalipuram, that I chanced upon the banner of this shop- Suba Silk House.

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As you can see from the photograph, the banner says “Don’t be Banal..take some risks in formal dressing”- now Banal(meaning commonplace) is a word which is not so commonly used in Indian context.  Interested, I entered the shop and found this gentleman in his 50’s sitting and reading a book. He introduced himself as Mr. Sekhar, and readily obliged for an interview. One of the reasons fortunately was that he knows about Great Lakes, and was most respectful of Uncle Bala.

 The half an hour discussion with Mr. Sekhar was an eye-opener to the extent to which our world has globalised, that a small garment store in the remote south Indian town of Mahabalipuram sends his shipments of clothes to as far as Scandinavian countries like Sweden and Denmark.

Mr. Sekhar is a native of Mahabalipuram and he set up his shop in 1992, making it one the oldest garment stores in Mahabalipuram currently. He specialises on fancy ladies garments made from Kancheepuram silk, and has varied items ranging from silk curtains, bed sheets, to very interesting and innovative sleeping bags.  Mr. Sekhar usually buys the defective silk sarees from Kancheepuram at 10% rate, and then removes the defective parts out and makes the dresses and other items from the good silk. This is how he started 20 years back, with a meagre capital, and he himself being the only tailor. Now he has 6-7 tailors working under him, and produces a yearly turnover of 15-16 lakhs, with a personal profit of 5-6 lakhs every year, inspite of keeping only 20-25% profit margin.

Mr. Sekhar’s main target segment are the foreigners who come visit Mahabalipuram. Truly we say that experience is wealth, and Mr Sekhar from his 20 years of experience understands the exact psyche of European customers. The main USP’s of his shop are that he doesn’t bargain, and all are Fixed Price items, though the price itself is very reasonable. For example: The dress in the above picture costs only Rs 300/-.
Now, the European customers, by nature, don’t like to go to a shop and bargain. Also Mr. Sekhar gives tremendous importance on quality. He takes measures like double stitching compared to the normal criss-cross single stitching method, making the garments much more durable.
 Also, he doesn’t try to push sale by calling out for customers standing outside his shop. In his own words “Europeans are very smart. They come to a place and usually stays for 15-20 days. They search the market completely, and having travelled vastly across the globe they have good understanding of materials, and what is good and what is bad in general.” So after scouting the entire market they finally go to the shop with the best product. Hence, the shop being not so flashy, and not doing push selling, doesn’t affect much. This keen understanding has made his shop one of the most sought after shop amongst foreigners, even in face of stiff competition. This has also helped him develop a vast network for exporting his goods. Usually the foreign customers who wants to trade, first takes back small quantities like 50-60 of different items and then depending on the response they get in their native markets, they order for more via email, and Mr Sekhar sends the goods via International courier. Mr. Sekhar has wide customer networks in European countries like Sweeden, Denmark, France.
Another major aspect of this foreigners based business is that since these foreigners are mostly tourisst, so customers are rarely repeated, and Mahabalipuram being such a famous tourist spot, there’s no dearth of new customers.
Interestingly he says that the devastating Tsunami of 2004, has actually acted a catalyst for big boom in the Mahabalipuram Market, because it made the place famous worldwide, and there has been a constant increase in the foreign tourist population every year evensince, which in-turn has led to more business.

Mr Sekhar has been very practical and prudent in his life. Though he doesn’t hold any formal educational degree and is just a std. 12 pass, he has educated his children well, and interestingly his son studies Fashion designing and helps his father design new clothes as per the latest trends. This keeps Mr Sekhar one step ahead of his competitors and maintain the novelty quotient of the shop.

This half an hour conversation with Mr. Sekhar was really enriching and provided deep insights as to how you can start as a small venture and then spread out globally, while still maintaining the basic ethics of business.

Thank You,
Abhradeep Sarkar
FT13397

Want to Travel…. Mahabalipuram to ???? "Part-2"

PART TWO

Previously I left Mahabs Tours with an unanswered question about their marketing strategy. This was the starting point of my second visit. I had also decided to visit few more Tour and Travels and do a comparative analysis about this industry in Mahabalipuram.

I was happy to see the same employee who previously answered my question with lot of fervour. He knew what I was going to request. I was straight to my question after a small Hi/hello. According to him, since Mahabs is not a big city marketing happens on its own. Next question - What he meant by on its own? When you open a shop a small inauguration is decent projection of your entrance in the Market. What next is on cards for shop’s market image enhancement? He said word of mouth is the strongest marketing technique in such market (Mahabs per say). I asked him since Mahabs is a tourist place people may not know about any shops. Answer was quite convincing. Tourists visit many other shops and that is when this publicity happens. Other shop owners inform tourists about Tour & Travels shops which they can visit for their travel plans. Obviously he dint answered what these shops get in return. Also, Local population also travels across India. They also form a decent proportion of Market base. Marketing Lesson - Word of Mouth still holds strong in small markets. I thanked him for his valuable time and left.

Next shop was J.R.S Tours and Travels. Before I start sharing my experience with J.R.S, I would like to share one observation. Most of the shops of same domain like, Tours and Travels, Grocery, Readymade garments and many more would mostly or always have their shops nearby. Reason is to create a small defined market for that domain for customer to have options and establish market share. It is very similar to a concept of supermarket i.e., “everything under one roof”. A good takeaway is that when you target small markets try to position your shop nearby your competitors as it gives you image enhancement.

Back to J.R.S, Owner of the shop is Miss Kavita Priyadarshi. This shop is there for last 40 years. Some legacy I must say. The lady knew about Great Lakes which saved my time which I would have spent convincing her on why/what I would like to study. I asked the same question which I asked at Mahabs Tours. Product mix contained Hotel and Travel Packages (which was missing from Mahabs Tour’s portfolio). Most of the product was sold through internet.  Most sold ones were Packages for Malaysia, Tamil Nadu (across the state), One day Chennai/ Pondicherry tour. Shop was congested but was full of Travel guides, Map, Brochures.  Pricing strategy was a bit strange.  They charged extra bucks from white skin and less from our own brown people. It’s pretty easy to convince Foreigners and vice versa for Indians. Bargain is something foreigners don’t know or don’t like- Quoted by Miss Kavita. Marketing was an easy task for this shop.  According to Kavita since the shop has been for generations (4 decades) they don’t have to do much for the same.  She still mentioned about local media advertising option. Mahabs has a local channel which charges approximately Rs 2000 for a two week long advertising strip running during local shows. They have a B2B partner in International Air Transport Association (IATA). Marketing lessons learnt-

·         History helps you sell.

·         Local Media can be used as a strong tool to market.

·         Price as per your target customers.

·         Business Associations helps provide better deals.

I visited one more shop named P.A Tours & Travels. Answers were more or less the same. This shop dint had a legacy like J.R.S. However they were also doing very well.  He mentioned that Tours and Travels market has close to 35 competitors in Mahabs but it’s not a cut throat competition. Any shop won’t hesitate consulting his/her customer to its competitor.

I would like to end this blog here and would like to wrap by writing synopsis of my entire experience in my next carve.

ANKIT SETHI

FT13408

Nilgiris Since 1905

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Nilgiris: At the heart of Great taste. Since 1905.

Muthuswamy Mudaliar, a mail runner in the British Colonial Rule is flooded with requests to carry products on his dairy trips into the hills of Ooty and Coonoor from Metupalayam in TamilNadu. He buys the butter business from an Englishman in Vannarpet and starts what he calls the “Nilgiris Dairy Farm Ltd”. The Nilgiris Dairy Farm Ltd shifts Operations to Ooty Club Road, still catering to the hills and specializing in dairy, dairy products, bakery and chocolates. With Ooty being a popular retreat for the British Administration in the region, business thrives. Nilgiris diversifies by opening the first outlet outside Ooty at Brigade Road in Bangalore in the year 1936 where they were able to capture the market for butter among the households. They opened a unit for producing Dairy Products in Erode for enhancing its production capacity to meet the growing markets. Later in the year 1971 Nilgiris became a Private limited Company and switches to self-service super market format. The foray of Nilgiris super market chain in Chennai happened in the year 1982 when it opened a bunch of outlets in Chennai, Erode and Coimbatore announcing its entry as a major player among the Supermarkets in the South.

The franchise Model adopted by Nilgiris is a huge success and enables it bring about a better customer focus and establish itself a reliable brand to the customer. The above mentioned facts are meant to a give a picture of how an entrepreneur is created by people themselves and the success of a business model is purely based on the customer centricity and the desire to provide a unique shopping experience rather than just satisfying the needs of the customer.

The focus now shifts to the outlet of Nilgiris at Nanganallur. Nanganallur is place in Chennai which is located in the suburbs of Chennai but is slowly growing into one of the most happening spiritual hub of Chennai after Mylapore. The rapid growth of flat culture and the fact that Nanganallur becoming easily accessible makes it all the more attractive for the IT People and the upper middle class who were earlier restricted to Adyar and Mylapore for purchasing houses.  Not to forget the old age population who live on heft pensions and returns coming out of smart investments done during their working tenure. This is the kind of demographic profile of the region.

Considering this demographic profile we have super markets vying with each other to establish their customer base. Nilgiris has achieved stupendous success in achieving the top position among the upper middle class population.

The reason for this being the fact that working on a franchise model enables Nilgiris to focus better on the customer needs as a particular franchise has to concentrate on the few areas which he owns and his performance is monitored regularly by the company and will be taken into consideration as Nilgiris tries to expand into new regions in and around Chennai. Chennai being an emerging market with a lot of scope for expansion; it becomes imperative for the franchise to be performing in its best business interest.

In Nanganallur, Nilgiris is being located in a strategic location close to a temple which attracts people on a daily basis. As far as analyzing Consumer preferences is concerned it is at its best to illustrate this let me narrate an example – Aavin Butter despite being high priced is preferred by people for making sweets and savouries by localities during festivals . During the last Diwali season there was a serious shortage of supply of Butter, it was during this time Nilgiris captured the market by increasing the availability of its butter and attracted consumers to purchase them by having it in different quantities.

The ambience is also pretty good making it comfortable for the consumer to think and purchase more rather than restricting them to the list. This becomes all the more important among the upper middle class population who purchase using Credit/Debit Cards. This provides an opportunity to purchase based on their current as well as the future needs.

Product positioning is pretty good and is constantly changed based on consumer preferences. The list of products which they market under their own Brand name is finely blended with the other existing brands in the product. Inventory maintenance is spot on and they ensure that the customer needs are met in the first visit. They also ensure that the recently launched products are also on the aisles so as to satisfy the initial surge based on the ad campaigns.

One more thing to prove their customer focus is the fact that we have a lot of roadside vegetable vendors and fruit vendors so people seldom buy fruits and vegetables from supermarket in our locality, taking cognizance of this fact they have devoted minimum shelf space for it and replaced it with packed food products like Paneer and Ice Creams.

The competitor focus which had come into the fore when they utilized their rented commercial space to the fullest extent after seeing the chat shop opened outside their outlet they opened shops making adai and appam which was purely to cater to the needs of the traditional south Indian old age population who were unable or not allowed to make those dishes in their home due to diet restrictions. This has been a pretty successful venture both for Nilgiris and the petty shop owners.

Nilgiris being an early entrant has capitalized on this advantage and has made the best out of the opportunity presented to them.

S..Santhosh Kumar

FT13472

The footwear market in mahabalipuram

The Footwear market in Mahabalipuram

The market of mahabalipuram seems to be very small but there is lot of competition in all types of markets. I will talk about the footwear market and how competition exists in this market. First I will talk about “SUN FOOT WEAR” located on 37 east raja street. The shop is in prime location (on the main road of the mahabalipuram market) and is less than 100 mts from the main square. It is adjacent to ‘hotel pallavan dynasty’ and opposite to ‘Hi! tours’ which are busy places during tourist season. This is one of the oldest foot wear shop in mahabalipuram (around 7 years old). 

The total area of the shop is approximately 300 sq feet and there is a sitting place for 3-4 customers at a time. A multi brand shop with all kinds of variety available, the price range is from Rs 100-900 (slippers) and Rs 400 -1500 (shoes). They maintain an average stock of 2500 pairs of footwear in the shop and the variety of foot wear ranges from casual wear to wedding collections and party wear. The majority of the customers are the local people but a large number of foreign tourists visit this shop to buy different varieties of footwear.

The common brands in this shop are Bata, Action, VKC, Paragon which contribute majorly to the sales and also some local brands like Fizik, Alive, Fusion, J&D, etc. The only challenge for this shop is availability of space; it is very small but has a good variety of stock. The shop has one sales woman and along with the owner, she caters to the needs of customers. The main competitors are shops like VKC, SK, Bata which are single brands shops and this one is a multi-brand shop at mahabalipuram. Even after the competition it has been able to generate revenues in excess of Rs 90,000.

While talking to the customer who came to buy sandals for party wear, I learned that the shop is the first choice of many people in mahabalipuram and has a good reputation in terms of quality and variety of foot wear available and also the price is competitive. The shop also gives discounts / warranties extended by the company and transfer it to the customer and also if there is a problem in the footwear they try to help the customer.

Kunal Kumar Gaddhyan

FT13433