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We always choose customer experience over profits: Amit Dutta, CEO, Le Marche Retail

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Le Marche started its journey in 2005 and established its presence in its catchment areas as a premium grocery supermarket. In 2017, DS Group acquired the brand to transform it into a professional entity which can be scaled up in a calibrated way in line with the envisaged strategy for its retail business.

We always choose customer experience over profits: Amit Dutta, CEO, Le Marche Retail

DS Group redefined its core value proposition, identified pillars of growth and worked towards strengthening them, upgraded store infrastructure and layouts in line with the revised strategy, established a high performance culture in the organisation with a professional team and process framework to back it up.

The organisation has been armed with the best in class IT systems to complete this transformation and all of this has yielded great results for the brand. The grocery supermarket ended 2019 with one of the highest growths in the retail segment, absolute best in class results against operational metrics with few stores clocking more than Rs 30,000 sale per square feet, enhanced customer acquisition and phenomenal employee engagement scores.

In a candid conversation with Progressive Grocer, , CEO, shares the journey, impact of pandemic, strategies and learnings and future plans of the brand.

Excerpts from the interview:

How is Le Marche different from others in the same category?

We are different from the other brands on the basis of ownership, operations and value proposition to customers.

Unlike other companies most of whom are retail-focused or retail-driven, we are a consumer goods conglomerate with business interests across various verticals and retail is one of them. I myself am involved in a lot of other consumer goods initiatives of the group as an advisor to the board. We understand the space and consumer needs and see retailing as a logical extension to our endeavor of offering best quality products to the customers.

Secondly, we are in this business for the long run, so we are not creating short-term unsustainable value. Our focus on compliances, processes and investments in people and systems is a good enough testimonial of that fact.

Thirdly, our value proposition is different. Fundamental drivers of partnering with our customers in making them a better version of themselves through better food and lifestyle is the core of our business. We are in the business of providing variety of products and information so that informed choices can be made. All this is backed by a great shopping experience – the definition of experience has evolved in recent times to include safety, hygiene and sanitization in a bigger way. As a business it is our responsibility to provide options across all price points, origins and pack sizes unlike some of our peers.

The fundamental right of selection should be with the customer as perceptions can vary. For example, a small pack can be construed by many as a price point pack but there is good reason to believe it is also a freshness pack as it is aligned with one time consumption, so who are we to deny our customers that right of picking multiple single use packs rather than a single multi-use pack.

Similarly, we focus equally on Indian and imported products as both categories have their own positives.

We make sure that each product is commercially viable for the space that it occupies has a guard rail for our merchandising strategy.

Traditionally, Le Marche has been seen as heavily dependent only on imported products and a niche player, but we have worked hard over the last two years to change that around to have a more inclusive merchandising strategy. From a business standpoint that ensures better transaction efficiencies for us.

We do not offer deep discounting because we believe that business strategy should be sustainable and prudent and given the margins in grocery retail, deep discounting is clearly not a prudent strategy. It may work for capital intensive models wherein rentals are not a part of P&L.

Tell us about your market presence

Currently, we are focusing on Delhi/ NCR with 50,000+ sq.ft. of retailing space and looking to further build on this through both physical and digital retailing. We are actively looking for inorganic growth options outside Delhi/ NCR as well.

What is the location strategy for your stores? Which locations do you prefer and what part do they play in your store sales?

Apart from location, store area and floor sizes also play an important part in our store selection. Given our focus on variety and experience as our core value proposition for our customer base, we need decent amount of space to bring that to life.

The fact that deep discounting is not core to our existence is also a contributor to our location strategy.

We prefer stores spanning across 6,000-10,000 sq.ft., preferably not split across multiple levels. We prefer stores in upscale localities where we can get customers who are looking at value from retailers other than just pricing advantage.

Share your omnichannel strategy with us.

We had stayed away from digital all these years given lack of a differentiator for online customer who has a more transactional need for shopping and looks at price advantages. We decided to stay focused on offline expansion. For convenience needs of our loyal customer base, we had a robust home delivery system.

However, the pandemic has changed the game and accelerated adoption of e-commerce by even those customers who are still loyal to a particular retail brand. It became imperative for us to pivot to this new normal. We have a more holistic approach to this as we are convinced that there will be a permanent change in customer buying behavior.

One part of our omnichannel approach is partnering with those platforms which are store forward rather than product forward. So, if customers are making the choice of clicking on the Le Marche icon they know what to expect from our brand unlike product forward platforms which relegate the retailer to a supplier and indulge in price wars.

Secondly, we have also forayed into our digital platform with differentiated products with an aim to mirror Le Marche’s offline experience online – in the next few days our web store, apps and even customer interaction BOT will also go live.

Thirdly, offline is here to stay and its importance cannot be negated. Additionally, though digital can be leveraged to enable offline further and aspects like enhancing employee productivity, digital audits, slot booking for shopping etc. can help us integrate online and offline better.

From a fulfillment point of view, stores will continue to be the primary fulfillment centers for us, however, for few locations we will also go the dark store route to ensure timely delivery.

What is the sales percentage in comparison to the same period last year?

There have been obvious headwinds given the times that we are in. Be it lesser footfalls, expats going back to their respective countries, curbs on certain categories of products at various points in time or ever changing interpretation of government directives by the local authorities, it has been a tough year for players like us who focused around offline retailing.

Howeverm, the resilience displayed by our team is remarkable. We lost only one day in this entire period and on all other days all our stores have been operational albeit with a lot of challenges. We took the onus of ensuring product availability to our customers. It is only because of this service orientation and passion that the team has displayed that we are growing over our last year numbers up to H1.

The festive season is critical for the retail industry and hopefully customers will bring in some cheer for all of us.

PRODUCTS & CATEGORIES

What is the range of products that you offer? Which is the fastest moving of these? How many SKUs do you have on offer?

We offer complete range of grocery merchandise. Whist covering the entire gamut of product categories in food, our range extends to home and personal care and few categories in lifestyle range too.

Our active range is of nearly 20,000 SKUs and we seek to churn the bottom 15-20 percent SKU’s every year through a robust delisting and relisting process.

Packaged food, dairy, fruits and vegetables and raw non-veg are some of our highest selling categories.

Tell us about your private label products. How much do they contribute to the overall revenue?

Like previously stated, Le Marche is different as it is the retail arm of a group which is one of the largest conglomerates in the consumer goods segment. As such we already have quite a few known brands from the group which we treat like private labels only.

Catch water, soda, spices and pulses, Fru, Pass Pass, Chingles and Baba Elaichi in confectionery, Natures Miracle hydroponics – a significantly differentiated offering in the F&V segment, or Snack Factory – range of makhanas and chips – occupy strong leadership positions in the categories they operate in at Le Marche.

The other important private label for us is the brand La Fraiche which houses all our fresh category products prepared inhouse by our chefs like salads, fresh beverages, dips, ready-to-eat snacks range including dim sums, or even some niche bakery products. This range is a significant part of our overall strategy as it not only adds to the experience but introduces customers to ingredients sold at Le Marche in a final product form. We also have our own brand called Finesse which solely focuses on gifting options.

We had a private label under the brand name of Le Marche for the staples range, which was also a decent contributor to our business, but we withdrew it during the pandemic and have plans to relaunch it in a bigger and better way.

Food or non-food – which category is a winner at Le Marche and why?

Right from our tagline – The Good Food Story – to customer perception and even space allocation in our stores, we are perceived as a food-first grocer. The same is reflected in our numbers as well where on a percentage contribution basis the business is lopsided towards food. However, on revenue per square feet basis our non-food numbers are also good.

Which are the new emerging categories at Le Marche?

Emerging categories can be divided on the basis of pre-pandemic and post-pandemic.

– Pre-pandemic we had made significant investments in terms of team, infrastructure and capital in building categories which offered foodservices to customers and they were turning out to be significant differentiators for us. These categories were fresh salads, cold pressed juices, freshly prepared guacamole or other dips, ready-to-eat products by our inhouse team. All of these products used ingredients available at Le Marche, so that customers had the opportunity of tasting them as part of a prepared product rather than having to buy the complete pack of ingredients. This had given us great results with guacamole being our highest selling SKU last year. In value terms, we sold more guacamole than packaged water or any other fruits and vegetable. It still continues to be a decent contributor.

– Post-pandemic there is a huge surge in categories which add convenience in the life of customers for at-home preparations – be it frozen, ready-to-cook or baking supplies, they are outpacing other categories. These categories were reasonably sized earlier but are now becoming fairly big for us. The products are almost like a service in themselves given the convenience they provide. One of our top sellers nowadays is the heat and eat version of dim sums.

STRATEGIES & LEARNINGS

What is your marketing strategy and what steps are you taking to promote the brand?

We have a three-pronged marketing approach

– In-store for communicating anything different that we are coming up with to our existing customer base – It can be in the form of digital on-screen communication or physical with information brochures being handed out.

– Catchment area led marketing plan which gives us the leeway to have different strategies for different stores as each store and its customer base has some unique aspects. Whenever that is the case we resort to this plan and try and reach out to the customers through targeted physical marketing by tying up with RWA’s or branding at hotspots in the catchment area.

– We are steadily increasing our spends on digital marketing to have communication with our customers at an overall brand level and also reach out to a newer customer base. On rare occasions, we follow the print route as well. We are fortunate that some part of marketing is also done by our customers’ word of mouth.

Share some key learnings that you have gleaned over the years in this business?

The most important one has been the most recent one which is to never rule out any possibility.

Another one which always holds the business in good stead is to place customer at the forefront of any decision making process. Whenever it is a call between additional income and customer experience, we always choose the latter.

Any noticeable consumption trends over the years?

The steady pace of growth of all things perceived to be healthier – be it organic, hydroponic or immunity boosting foods – is a trend which is here to stay. Food is no longer just about taste but the health quotient as well, hence rendering the back panel of packaging is more important than the front panel.

In times to come, health quotient of a product will outweigh the brand quotient.

Premiumization is also an emerging trend but that is a function of the customer base, if the value proposition is compelling enough then customer will pay for it.

With at home consumption increasing owing to the pandemic for both food and non-food, products which provide the convenience of self-service for a special occasion are also high in demand.

COVID-19

How has pandemic impacted the brand?

We deployed strategies focusing on merchandising range like preferring width over depth, ensuring customers get the products that they need even if it meant it was from a different brand, ensuring availability by broad-basing the traditional supplier base or sending our delivery vehicles or teams to pick up stocks. This ensured that we were able to serve customers well during these tough times. As more and more customers reduced their frequency of shopping, they were looking for retail options wherein they can get all that they need under one roof and this resonated with the merchandising strategy that we have been focusing on since last two years.

Other aspects like focusing on safety and sanitization, communicating with our customers on the practices that we are following and also assuring them that we will be there to serve them played an important part. When everyone was increasing prices of immunity boosters and sanitizers, we ran a discount on those products and kept them all together at the entrance of the store.

We treated this period like a time for social service and did not focus on sales numbers, as businesses will outlast the pandemic and the relationships forged with our customers during these times will hold true for years to come.

Resultantly, Le Marche emerged as a preferred retailer for majority of the customers in our catchment areas.

Share with us the sales percentage – both online and in-store – in comparison to the same period last year.

Till before the pandemic, we as a brand thrived on footfall driven sales as customers loved to spend time at our stores going through the aisles and picking up products to experiment or trying out our foodservices. Non footfall led sales were in single digit percentage for us. Now, it has grown by 3X and is in mid-teens range. We expect it to grow further with our digital assets that are slated to be launched in the next few days.

How do you propose to tackle the concept of contactless deliveries?

We have accepted that it is the new normal and there is no alternative. Contactless deliveries is equally important for both customers as well as our own employees.

This is inculcated by frequent messaging to our riders as part of their learning process. Once the order is confirmed and the payment made, we confirm the delivery timing to customers and our riders placed the orders on a clean surface outside their homes.

Have your HR policies changed in the wake of pandemic?

We made some changes at the beginning of the year which were not led by the pandemic. From a pandemic standpoint, we have managed very well, inspite of the fact that growth rates are muted.

We have introduced safety and sanitization processes and SOP’s for our employees which I monitor personally as that is incumbent on me to ensure the safety and well-being of the team. Paid leaves are provided in case any symptoms whatsoever are observed in any employee. Best in class sanitization of stores is done on a periodic basis. Flexible working arrangements are made for all non-sales staff.

No salary was deducted for staff not being able to report to work during the peak of the lockdown, We incentivized people reporting to work and even made stay arrangements. Shift timings were also reduced to ensure minimal staff presence.

We conducted a digital survey to assess what our staff thought of all the arrangements done by the company during these times and if there is anything that can be done better. We received an engagement score in excess of 90 percent.

TECHNOLOGY ADOPTION

Share with us your top 3 technologies.

We have had to completely revamp the IT landscape of the organisation as what we inherited was not capable of sustaining our ambition of running the business in a particular manner.

We started with making the backend completely robust by implementing an integrated solution for POS, finance and retail operations in the form of Microsoft D365 which is a cloud based ERP.

There is a separate solution for HRMS which takes care of our employee management that includes a conversational BOT for our employees to interact about our policies in case of any questions, digital trainings and SOP’s to be pushed out to them from time to time and manage their day to day operations like leaves, feedback, suggestions, grievance, payroll etc. in a very transparent manner.

Then there are a host of other customer-focused tech interventions that we have implemented or are in process like working with aggregators, implementing an integration layer which helps ease out and smoothen operations by removing the complexity of having to deal with multiple platforms, implementing a conversational BOT for product discovery as well as order to cash cycle and our own digital foray with Le Marche Retail web store and apps.

Have you adopted new technologies since the lockdown to extend your reach?

Resilience and agility were the buzzwords that helped us significantly. We quickly put tactical initiatives in place to enhance digital interactions with our customers and facilitate offline by use of technology.

For digital interactions with our customers, we revamped our home delivery options, strengthened our communication with customers through WhatsApp and social media making them aware about stock situations and product delivery or alternatives, initiated tactical partnerships with aggregators that gave us speed in execution and once it was clear that the trend is here to stay, we recalibrated our strategy and started to work on our digital business models.

We also leveraged technology for facilitating offline and making operations less dependent on manpower given the need of the times. Some of the initiatives we took were – offering shopping slot booking so that customers do not have to stand in queues, tactical options for mobile POS to facilitate faster checkouts, starting digital audits, implementing BOT for employee queries on policies and even digitizing operational aspects like invoice transfers from stores to finance for data entry.

Which are the technologies that you want to bring in over the next one year?

We are evaluating the use of Artificial Intelligence (AI) to take the next step after our existing technology initiatives stabilise.

AI will be used both for the demand side and supply side. From generating demand standpoint, AI can be used to communicate and suggest products to customers on the basis of their health needs. This is important given the wide assortment that we carry, and customers might not be aware of it that some products can be really useful for them.

For the supply side, it can be used to highlight any quality exceptions through computer aided vision especially for the fresh categories.

We will also continue to leverage technology to empower our online customers with as much visibility, knowledge and information they need to make a buying decision as it is available in an offline journey.

THE FUTURE

What are your plans and targets for the future? Going ahead, will you concentrate on growing online or taking your store count up?

Both online and offline channels are needed for a holistic value proposition as the customers demand both the options. While online builds reach, offline helps in building customer confidence and aids engaged buying.

What is needed, however, is a well-crafted location and expansion strategy for both channels whilst looking at the business and customer as one single entity. Channels are mere means of fulfillment of needs of customers.

What is the next big change that you see in grocery retail in the wake of the pandemic?

There will be some consolidation in the grocery space owing to the pandemic. Customers have begun crystalising their choice of stores and will prefer to consolidate and buy from lesser places as compared to earlier.

The era of waiting for customers to reach out to us is now over, we will also need to reach out to them. Offline will continue to be the highest contributor and online can no longer be ignored.

The other important change is that customers will possibly have stronger affinity to retail brands rather than brands of products making it imperative that consumer goods companies work in closer coordination with retailers at all levels and not just follow a pareto approach of focusing on selected few. The strategies will have to evolve to be catchment area led rather than total revenue led.