Retail
Chronicles Monthly Newsletter | Volume 5 | Issue 7 | October 2020Â
CONTENTS 03 A D A P T
OR DIE: THE TALE OF BLOCKBUSTER’S DEMISE
Change is the only constant, and Blockbuster's reluctance to it cost the company to go downhill.
07 T H E
WRITERS Riya Shah | Shikha | Nithin | Shubham Bhandari |
Guest Writer- Rishabh Hemani
SENIOR DESIGN TEAM
COLD STRUGGLES OF KELLOGG'S IN INDIA
Ayush Goyal | Jeet Doshi | Pushpak Holani | Shikhar Gupta |
The iconic Kellogg’s logo was first handwritten by founder Will Keith Kellogg and has been with the company ever since.
JUNIOR DESIGN TEAM
11 W H Y
INDIA DID NOT ACCEPT DUNKIN DONUTS? What's gone wrong with one of the biggest markets in the world and is it worth trying once more?
14 W H Y
GOOGLE+ WAS NOT A PLUS TO THE GOOGLE?
Google+ was the most ambitious project of Google, launched in 2011 as the successor of Google Buzz.
1 8 TIMBERLAND
Timberland creates its first guaranteed waterproof boot called the Timberland
Nilesh Agarwal | Prachi Sharma | Prashant Sihag | Abhishek Kulkarni | Shivani Kunkolienkar | Sneha Patel |
EDITING TEAM Abhishek Wakode
Adapt or Die: The tale of Blockbuster’s demise
RISHABH HEMANI MBA B Retail Chronicles | Page 3
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The Rise Blockbuster was a movie rental service that was founded in 1985 in the company name of Blockbuster Video Inc. by a businessman called David Cook, they opened their first store in Dallas which was a huge success right from the beginning. Their business model was simple – they bought movies and rented them out enough times to cover the cost. Additionally, they also charged considerable late fees in case of untimely returns. During those days there was not another way to watch movies again once they were taken down from cinema halls (except for buying them at a high price) so Blockbuster’s business flourished quickly. The Expansion By the next 3 years, it had over 200
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stores in the US and by 1993 it rose to 3600. It expanded by acquiring established stores and franchising, spreading its footprints across the United Kingdom, Japan, Australia, and even in parts of Latin America. At the time when movies have to be saved physically in VHS tapes, Blockbuster provided a choice of more than 8000 VHS tapes which they banked on and put hefty late fee charges on its customers which was the most annoying thing about Blockbuster but it formed a large chunk of their revenues. At one point in the future, it was discovered that Blockbuster had made $800 million through late fees. Entry of Netflix In 1997, a man called Reed Hastings also went through a frustrating experience on returning a movie late to Blockbuster
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it was unaware of the competition. In 2001, Blockbuster started a “video-ondemand” service on digital platform partnering with ENRON, a service that Netflix started in 2007. But it failed because ENRON went bankrupt soon. Had this service worked it could have put them two steps ahead of their rivals. Legacy Thinking
for which he was charged $40 which compelled him to start Netflix with a business model more value-adding than Blockbuster’s, leveraging the internet. People could browse the movies on Netflix’s website, rent a certain number of movies monthly, and have them mailed at their doorstep without any late fees. Furthermore, Netflix’s movie suggestions based on the customer’s preferences also helped to boost the business. It was a win-win for both customers and the company. This digital model formed the key to the success of Netflix and Hastings realized the potential of the synergy of the two companies. Hence, in 2000 he offered the company to Blockbuster at $50 million but he was laughed off the board room. In hindsight, this seems like a foolish decision, but Blockbuster declined the deal because they thought they could beat the rival. It was not that
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In 2004, Blockbuster was at its peak with a valuation of $5 billion. But what is surprising is that they had around 9000 stores globally i.e. they had to manage real estate costs, employee costs, etc. at 9000 different locations. Mind you, this is 8 years after the advent of the internet. By this time Netflix had developed a strong customer base on the digital platform and agile mailing service. In short, Blockbuster was following old ways and this legacy mindset failed them eventually.
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customer base on the digital platform and agile mailing service. In short, Blockbuster was following old ways and this legacy mindset failed them eventually. Blockbuster was out there trapped in with a ton of real estate and managerial costs and when it started its mailing service like Netflix’s it did not work well because of the high price of the service. From 2004-06 Blockbuster was declining and their rival was heading the opposite direction. The Demise Blockbuster was shutting down its stores across the world and its poor health reflected on its stock chart. Finally, in 2007 Netflix came up with its video streaming platform hammering the final nail in the coffin of Blockbuster. The company then went bankrupt in 2010.
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Conclusion Everything in Blockbuster’s story points to how the company failed to adapt QUICKLY to the changing dynamics of the environment. It failed at restructuring its late fee business model, failed at introducing mailing service on time, failed at transforming digitally on time, was late to pick up cues from consumer behavior, and poorly managed the assets and resources. Their story is more about failure at quick adaption than a mere rival striking a sword in its belly
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THE COLD STRUGGLES OF IN INDIA
RIYA SHAH Retail Chronicles | Page 7
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Expanding one’s business into a new market is not simply about translating the tagline. For those who are acquainted with the works of Max McKeown, the next few lines would be familiar. In his book, ‘Adaptability: The Art of Winning in an Age Of Uncertainty’, the author writes, “All failure is the failure to adapt, all success is successful adaptation.” What better way to adapt, if not by doing your research first? Kellogg’s did not think so and thus brought trouble knocking at their premises. By the 1980s, Kellogg’s had experienced stupendous growth with the annual sales figure reaching above US$6 billion. It was only in the 1990s that it witnessed a slowdown as the traditional markets of the US and the UK started to stagnate. It was time for them to expand. It was India with its extensive population, that Kellogg’s deemed to be fit. Retail Chronicles | Page 8
Cornflakes for breakfast in the ’90s In 1994 when Kellogg’s entered India, it brought for the Indian markets its flagship product: Kellogg’s cornflakes. This ready-to-eat breakfast item was not something Indian consumers were accustomed to eating. In India, especially for the 250 million middleclass population that Kellogg’s targeted, the prevailing convention was to consume warm food for breakfast. Days in India started by boiling milk to consume it lukewarm and adding sugar to it. Thus, even when Kellogg’s entered with their healthy alternative, this cold breakfast option did not sit well with the audience.
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Clumsy cultural cramming India is a nation that is often labeled as an amalgamation of myriad cultures. In a country overflowing with distinct identities surrounding region, religion, customs, taste, and preferences; it becomes pivotal to assess the target’s response to the given product. This assessment enables brands to make changes to suit the needs of their customers better. However, Kellogg’s failed to do this. Not only did they mistaken India as a homogeneous market, but it also ceased to be flexible with their product concerning customer preferences. To put it in perspective, let us consider the rabbit from Alice in Wonderland. Kellogg’s attempt at entering India felt analogous to selling a wall clock to the white rabbit instead of a pocket watch.
Snapshot before the decade break It is now evident how crucial market research and adaptability are for a brand to make a mark and sustain. Kellogg’s eventually ended up updating its marketing mix. Among the four P’s, pricing saw a visible change. Kellogg’s set up a plant at Taloja, Navi Mumbai to reduce cost. This led them to shift from Costbased pricing to Competitor-based pricing with their new products. So, while it competes with pricing for the newer products, it continued to explore the premium segment targeting urban India by introducing cereal variants such as Kellogg’s Muesli. Focusing on nutrition and taste, it introduced Granola in the modern trade. To be louder about their positioning, it allocated its creative duties to Ogilvy.
A dubious revival Initially, sales grew when the company realized that the idea of eating cereal needs to be promoted along with the product. Nonetheless, this surge was soon attributed as fickle as the product’s pricing made it a novelty purchase. Even when customers liked the product, it was too expensive for them to make it a recurring transaction. Kellogg’s refused to bow down to this pressure and decided to introduce another set of products. This included Flakes, Honey Crunch, and Special K among others. It even attempted to ‘Indianize’ by opting for fusion cereals of flavors such as rose, coconut, and mango. The outcome was dire as one might have guessed. Kellogg’s had failed to establish a lasting impact and was nowhere near to replicate the success it achieved in the west.
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Implication The cereal market at present is fragmented, dominated by multinationals, and extremely competitive. There are big players such as PepsiCo and Nestle entering which only increases the price sensitivity. Apart from this, a Bloomberg article points out how cereals are not yet picked at the local mom-and-pop stores. Demand for it remains from customers who spend higher than average on their breakfast bills. This does not allow penetration and leaves the company with massive untapped potential.
In a country like India, where breakfast is either skipped or is made up of strict ethnic preferences, acceptance of a product that demands lifestyle change becomes difficult. For Kellogg’s India, there is a long way before it establishes itself like it did in the US and UK markets. However, it fair to say how avoidance of unheeding entry in India could have saved Kellogg's a few cold struggles it encountered. .
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Why India did not accept Dunkin Donuts?
Shikha - MBA C Retail Chronicles | Page 11
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Donut is a soft and fried dessert loved by almost everyone in the west. The icing on the top makes it more tempting. Dunkin donuts is a renowned name when we talk about breakfast chains and especially breakfast in America. It is one of the largest coffee shops and donut shops in the world with over 12,900 locations in 42 countries. Welcome to India Dunkin came to India in 2012 with high ambitions to capture one of the biggest markets for pretty much anything in the world. Jubilant Food Works Ltd, the franchise owner of Dunkin in India gradually expanded to 77 stores. But Dunkin could not win that same popularity in India as in other parts of the world. It had to close more than half of its stores or scale them down by Retail Chronicles | Page 12
the end of 2018.. The “secret� strategy Dunkin entered India with its typical breakfast first strategy and planned for heavy traffic at the start of the day, but it did not know what Indians preferred in the morning which was a big mistake for starters. Indians do not usually prefer grab-n-go breakfast as Americans do. Here people prefer local cuisine for breakfast and mostly do not like to start their days off with sweet baked food. Although Dunkin tried to localize its menu by introducing donut flavors that were more adept to Indian taste buds, sandwiches with an Indian twist and chai’ but Indians just were not all that interested in eating donuts for breakfast.
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Dilution of their own image Dunkin pushed its operating hours later, rolled out Diwali doughnuts with a savory twist to downplay its image as a doughnut company. It came out with burgers that were never done before by Dunkin which increased the footfall to the stores. But making burgers anchor point of the brand seemed to dilute the image of Dunkin.
Is it worth trying once more? In fact, it is not just Dunkin Donuts that is struggling but its direct rivals Krispy Kreme and Mad over donuts are rocking the same boat, struggling to make Indians fall in love with the Donuts. Dunkin Donuts has flopped in other countries before as well. For example, it entered and failed in China twice before entering for the third time there with a better understanding of the Chinese consumer. The question that arises now is that is it worth it to try again in the Indian market. Probably yes because Indians are changing their prejudices and leaving their inhibitions behind, opening a lot more to western food and culture, and India being the secondmost populous country in the world cannot be surpassed just like that. All that it needs is a better understanding of the Indian consumer and a more concrete, well thought out strategy.
What went wrong? Moreover, Donuts was an assorted dessert, a purchase one makes impulsively or to celebrate occasionally. The price point offered by Dunkin was also high considering that the average income of an Indian is around Rs.30000 per month. Something that had nothing to do with the menu was the stores it was opening in the country- too many, too fast. The size of the stores was too big leading to higher operational costs. Retail Chronicles | Page 13
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NITHIN B MBA
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The year 2020 has been a tight rope walk for most of the nations. While citizens fear succumbing to the virus, governments fear for the economy falling into vicious cycle. The pandemic has debilitated most of the businesses and some are hanging on a loose thread struggling to survive. If it weren’t for the pandemic, would the businesses have flourished? Cannot predict right? So, what are the reasons behind rise and fall of businesses? Trying to find answers might seem a herculean task since it depends on several factors. Even Google might find it difficult to figure out the answers as it has its own share of failed businesses and products that are dead now. If you visit the Google Graveyard, there is a list of products and applications that are no longer functioning. It came as no surprise when the search giant Google announced that it would be shutting down the operations of Google+ by Aug 2019. Many wondered as when was the
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Google+ operational? It seemed obvious as the Google+ was discontinued due to low user engagement. Google+ was the most ambitious project of Google, launched in 2011 as the successor of Google Buzz. It was touted as a contemporary to the then existing Facebook and Twitter. In a short period, it emerged as a prominent player with its cool features and quickly gained the traction. Within a year of its launch, it gained 90+ million users. THE ROLLER COASTER RIDE Back in 2011, when Google made its way into social networking as Google+, the future looked promising with the consistent growth in the user base. With a clean interface, no ads, and relatively new features like Circles, +1button, Hangouts for live video chat, Google+ successfully instigated a sense of newness. The entry of the new player was worrisome to the
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Facebook and it perceived Google+ as a potential threat. Also, Google+ pretended to never acknowledge Facebook as its competitor. The tables got turned when the Google+ cofounder ‘Vic Gundotra’ walked away from the company in 2014. By the time, Facebook had built its network substantially. Now, Google+ had the challenge of bringing in new users while trying to retain the previous numbers. Eventually Google+’s mission changed from fixing online sharing to overthrowing Facebook. It was keen on battling with the fad of Facebook. But Facebook had always been user oriented by understanding the requirements and updating as the user intended. As the ex-employee Morgan Krunston explains - the employees had no idea of what they were doing, and all were working on a separate module with what was termed as a Grand vision. There was a lack of clear differentiation in its products and features. Circles - The core feature, which was in comparison to the Facebook groups, people found it difficult to navigate, share and stay connected. The whole process of - creating circles for families and then sharing to only
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those groups, was not much appealing to the users who were already accustomed to using Facebook Groups. The +1 button and Google+ pages were in sheer resemblance with the Facebook’s Like button and pages respectively. Also, the Hashtag feature was inspired from the twitter. Using the same feature in other applications seemed meaningless to the users unless there was something unique to experience. The invite only function drained the enthusiasm of the new users who who wished to try it. Without an invite it was impossible to create the account. This resulted in users turning away from the Google+. By the time this mistake was realized and was made open to all, there was not much ground left to fix it anymore.
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One more drawback with the Google+ was it not being user friendly with mobile phones. The Facebook was interfaced to work in a simple way even when the mobile internet generation was at its beginning. Both the 2G and 3G users had similar experience with not much difference. This enabled Facebook to stand as the friendly social network. For all these reasons, users started disengaging from Google+. There was significant drop in the average time users spent on the application. It was 3.3 minutes compared to 7.5 hours in FB. Instead of addressing the issue, Google+ started forcing itself on the users. One such extreme move was - forcing people to create Google+ account to post a comment on the YouTube. This created a huge backlash and Google+ had started digging its own grave by this time. The final nail in the coffin- Few years back, there were complaints on profile data being misused. Apparently, suspicions of about 5L user’s data being breached due to a bug in its interface were never acknowledged. An additional bug in Google+ API, part of a
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software update, and exposed user data from 52.5 million accounts for six days before it was discovered and rectified. Google+'s failure was not unexpected. Even with some of the best features like the Sparks, Hangouts for text and video chats, Google+ Local - allowed users to post photos and reviews of locations, it failed to create an impression among the users. While Facebook, Instagram, twitter, Snapchat were built from the clay studying the user expectations, Google+ was built on the fear of losing to Facebook. The innovation was limited to redesigning the interface and modifications in the features. Instead of trying to fit in where it didn’t belong to, Google could have focused on building a product native to its core –search. With nothing new to offer, Google+ was like an old wine in the new bottle, which the users didn’t wish to savour. Today Google+ is closed for normal consumers but is available for the Enterprise users as G-Suite. Google+ sets a perfect example for – If you fail to Plan, you plan to fail.
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TIMBERLAND
Shubham Bhandari -MBA RM Retail Chronicles | Page 18
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Introduction: Many Indian brands did not do well overseas but there are so many overseas companies that did not do well in India. India is a market in which every company wants to capitalize. But there are many difficulties that a company could face in a country like India and one such difficulty could be Local competition. Even though when foreign brands come to India, Indian customers tend to prefer that as they consider foreign companies to be better, more reliable, more fashionable, and a chance to show off. But this is a story of a company that did fail due to local brand competition. Timberland is a well-established brand for trekking and outdoor shoes which were established back in the US in the 1920s. But as a bootmaker and as a brand ‘Timberland’ was established in the year 1973.
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Timberland has its presence and is well established in American and European markets. Timberland entered the Indian market in the year 2009 in collaboration with Reliance, by the time they entered into the Indian market, Woodland a company of Indian origin with a name and logo similar to Timberland is already established in India with around 500 stores. At that time Woodland had an 80-85 % market share in the category of Adventure Shoes, the same category in which Timberland deals. Why was Timberland not able to leave a mark? Not only their logos and brand name are similar but their stores also had the same design, as the people In India had not heard of the brand name, they conceived Timberland as a knockoff for Woodland. In the eyes of
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Indian People, Timberland was to Woodland, what Abidas was to Adidas. In addition to that Timberland shoes were far more expensive than Woodland which also created discomfort among Indian Customers. In an interview with Mints.com Darshan Mehta CEO of Reliance Brands Ltd. pointed out that when they agreed with Timberland, they knew that they will have Intellectual Property issues with Woodland and also that Timberland costs three times that of Woodland that created the problem for Timberland.
What could have been done differently Firstly, the cost of timberland products, Foreign brands bring awareness about the product but when the consumers get to know that a similar company is making almost similar products at a comparatively low price then the consumers would buy the products which are less expensive as they feel that these products are valued for money. In India, not many people are engaged in trekking and to appeal to the mass Timberland should have made products that were specifically targeted to the Indian consumers. The Logo and Name of Timberland being the same as Woodland also didn’t help as the logos are almost identical. Timberland could have existed side by side with Woodland as Reebok, Adidas and Nike exist but the difference here was that Woodland had a majority stake in the adventure gear category unlike Nike or Adidas in the Sports gear category, it’s difficult to grow for a company that has low market share and higher price in this case Timberland.
In the purview of expanding to other countries where Timberland already exists Woodland agreed to co-exist in the Indian Market, but the plane of success never took off for Timberland in India, in its peak also, it only had 14 stores which say a lot about the situation of Timberland in India. After struggling for around 7 years Timberland decided to close its operation in March 2015.
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