The power of the penny

Retail diary: Perennial CCO Tara O'Neil says North American retailers should take a lesson from India's lowest-income shopping store.

By Tara O’Neil

Retailers and designers alike have a growing opportunity at hand. According to a Daily Bread Food Bank report, GTA food banks had 1.2 million visits in 2011, and Ontario food banks saw a 23% increase in visits between 2009 and 2010. In a country where rising income inequality shows no signs of slowing, it’s time for us to help the 3.2 million affected Canadians by designing retail solutions that make a meaningful difference in their lives.

As designers, we seek out retailers who want beautiful interiors and clever, interactive experiences. But while designing these stores may win us beauty contests, they fail to connect to a mass audience. It seems we sometimes forget design’s ability to solve business problems and address consumer needs.

At the bottom of the socioeconomic pyramid lies a group of shoppers desperate for someone to understand and respond to their needs. Low-income consumers make up a global market of five to six billion people who, despite their circumstances, aspire to a better life and want the same things as any other consumer: good quality products at a good prices.

They may only have pennies to spend, but as a demographic group they are economically powerful. Take India, for example: there are 350 million consumers who have a daily household income of $2 to $5. But that’s a combined spending power of more than $365 billion annually. That’s a number retailers cannot ignore.

Modern retail is a relatively new concept in India. Before its introduction, shopping choices consisted of wet markets selling fresh meats and produce, and small corner stores, called kiranas. Selection, quality and price of products fluctuated daily. The consumer experience was inconsistent, inconvenient, often unsanitary, and sometimes unfair.

But big, shiny, beautiful stores are intimidating and carry a high price perception. Imagine shopping in a store with air conditioning for the first time. Would you trust that store to offer the best prices? Now put yourself in the shoes of the retailer. You don’t have a lot of money to spend if you want to offer rock bottom prices that will rival the kiranas. How do you find a balance between engaging and affordable?

The key to creating a successful retail experience for low-income Indian consumers is smart design – providing functional spaces that offer real solutions, while assuring shoppers they are getting great value in an environment that feeds their aspirations, because they matter too.

In 2011, Perennial began working with Vishal Retail, a struggling mass merchant with stores throughout India. Because it’s a nationwide chain, Vishal can provide large selection and consistent quality at prices that rival those of kiranas (pictured left). Our task was to revitalize their offer and appeal to the low-income market.

We evolved their store layout to reintroduce grocery into their core offering and bring it to the forefront of the experience. The new environment is easier to shop, presents a more unified brand message, and has clearer communications that incorporate local vernacular. To help customers find the best deals, we introduced feature promotional areas.

Since the opening of the first renovated store in Gurgaon, Vishal has seen a 27% sales increase. That’s a powerful number, and it came from a store without bells and whistles. Instead, it was the result of basic retail principles put into action. Great design isn’t only about the visual; it’s also about the idea. In this case, it was an idea to make people feel empowered instead of poor, included instead of segregated.

The learning from the Vishal Retail project is particularly relevant to current challenges within North America. Here, we have a middle class that is struggling to keep up with the increasing cost of living. Debt, unemployment and economic uncertainty have put pressure on all consumers, but particularly the middle and lower income.

After paying for housing, the working poor have an average daily budget of $5.67 to spend on food, transportation and other living expenses. Where can these consumers get access to fresh, healthy, affordable food, in an environment that doesn’t punish them for being poor.

Reaching this powerful, emerging consumer group means creating solutions that are smarter, tighter, faster, and cheaper; it means creating a strong value proposition that helps consumers get the most out of every penny. Retailers could learn a thing or two from India.

Tara O’Neil has over 20 years of experience in retail design, providing leadership and strategic creative direction. She specializes in combining creativity with business acumen to develop innovative, inspiring retail environments that drive increased sales.