Interview: Mark Ashman, former CEO, HyperCITY
posted: 15 January, 2015
In the second in a series of interviews with the great and the good of global retail, ThisIsRetail talks to Mark Ashman. Mark was most recently CEO of HyperCity, a pan-India hypermarket chain, the first to deliver a profitable format for this emerging market. Before this he was CEO of Marks and Spencer in India, and responsible for establishing the successful Joint Venture with Reliance. He has a clear track record of transforming business performance and profit, creating lasting partnerships and building a strong people legacy, and is now looking for the next leadership challenge.
How did the UK’s major grocery chains get into such trouble, and what actions could they take to restore their fortunes?
The quick answer is that they stopped really understanding their customers’ needs. But this would be a huge simplification in what is a defining shift in customer shopping habits in the UK.
On space, I believe the mistake has been one of not accepting the consumer shift and not changing strategy boldly and quickly enough. In moving towards convenience retailing and building online capability, the large supermarkets acknowledged the changing habits, but failed to address the corresponding reduction in big box space.
Allowing low cost operators too much room to manoeuvre is a salient lesson in never becoming complacent and always remembering that a competitor is just that, regardless of size.
For the customer, putting it right is straight-forward: right product, right price, right time. For the retailer, the required cultural and structural changes should not be underestimated and the costs will be high.
Some grocery brands are thought to occupy 20% more selling space than they need. What would you do to make the real estate more profitable?
Defining a profitable hypermarket model for India required us to re-think the successful western big box model, both in terms of size, 30-50,000 ft² from the previous 100,000+ ft², and product mix. We increased the sales penetration of apparel and home, exited the mobile and electronics product categories, and leased more space to concessions. This created a vibrant shopping destination and delivered profitable stores. All of the above can be applied today in the UK, in addition to some tough calls on closing unprofitable space.
How can operating costs be reduced without damaging levels of customer service and satisfaction?
Retailers too often only look at costs when sales are tough. Having established Marks and Spencer in India and delivered a profitable Hypermarket model for HyperCity, we spent considerable time refining our operating model in order to deliver a profitable and sustainable operation for India. When you commercially analyse historic cost data and challenge the status quo, it is surprising how much opportunity to reduce operating costs presents itself, usually with no impact to customers. In fact it is often internal perception on what customers value that shapes cost discussions!
However it takes a mind-set and determination to cut through most organisations’ obsession with annual operating plans to really see this opportunity.
The major grocery chains in France, such as Auchan and Carrefour, may have found ways to counter the growth of discounters. Can their UK counterparts do the same?
Yes of course, the difficulty is accepting that the game has changed, once you have done this, refining a new operating model just takes hard work and determination. The larger challenge is that matching the competition is only a short-term strategy, price being the obvious but painful lever.
Long-term the grocery chains need to define why and how the brand is different from the competition, if they are to retain and attract new customers. The customer is certainly going to benefit in the short-term with a lower weekly shopping bill, but let’s hope that they quickly get to experience new and innovative products and store environments.
What are the major challenges international brands such as Marks & Spencer face when entering a market like India?
The first and only question any retail brand must ask is ‘are we relevant to the consumer in the market we are thinking of entering?’. Too many retail businesses assume a successful brand in a home market guarantees them success in another and history shows some very expensive mistakes.
Luckily the Marks and Spencer brand resonates with Indian consumers, who understand value (price/quality). Unfortunately the franchise partner had tried to position the brand as a luxury brand in India, with small stores and very high prices. So the first challenge for the new joint venture business, (Marks and Spencer & Reliance), was to correct this positioning, essential for the brand’s future success in India.
The next challenge for international brands is how to interpret the home market operating manual for the new international market. For India, keeping the essential brand operating DNA but ensuring that operating practices are right for both the local employee and local customer was key. This critically meant a local product sourcing strategy for Marks and Spencer in India to avoid the then 40-50% import duties on apparel and key product design changes for the Indian consumer. After that it’s just business as usual!
Did you adapt your leadership style to the local environment? If so, in what ways?
Yes, I have always believed that great leadership is about supporting people to achieve more than they thought possible, to do this effectively, “personalising” both to the culture and the individual is essential.
The route to achieving the end goal in an emerging market is full of complexity and ambiguity, keeping a simple well defined strategy, believing in core retail principles and being consistent will ultimately deliver the right results.
For India, patience is more than a virtue, it’s an essential. “Keep Calm and Carry on” became critical to our success, particularly as CEO of HyperCity. The organised food sector is in its infancy and operators are helping to define both Government and market policy, with many twists and turns along the way.
Given the cost and scarcity of suitable real estate in India, how do you anticipate major retailers will seek to expand their operations?
The availability of good retail space is a critical concern to the pace of retailers’ expansion plans in India. Having a flexible approach to store size, and in some cases location, can only go some way to mitigate real space shortage. For apparel retailers I believe it is manageable, however for a number of the large box food retailers, regional rather than pan-India chains are likely. eCommerce will be critical for many retailers in order to successfully penetrate this diverse market.
India is currently experiencing an eCommerce boom. Having trialled a home delivery programme while with HyperCity, what challenges to sustainable growth do you envisage?
Given the challenges of physical infrastructure in India, but the advanced nature of mobile connectivity and the growth of smartphones, pure online and omni-channel retailing will play a critical and fast growing part for organised retailers in India.
HyperCity successfully trialled food home delivery in key catchments in Mumbai, to demonstrate that we could handle the picking and last mile delivery, as well as understanding the Indian consumers’ attitude. For the trial we used a call centre to take the order and we realised that for any scaleable roll-out we required an online solution. HyperCity was able to partner with ZopNow, based in Bangalore, who had the best online front-end, but wanted help with the back-end logistics, notably suppliers and stockholding.
In partnering, Hypercity and ZopNow have a scaleable online model, which will allow HyperCity to better penetrate the catchments and leverage its physical store investment.
The pure online players have largely gone down the discount format, focussed on achieving market share, this is causing the physical retailers to be cautious, but ultimately the Indian consumer will understand that omni-channel retailing is certainly not just about a discount.
The combination of pure online and omni-channel will see exponential growth in the future.