Executive Interviews: Interview with Guillermo D'andrea on Emerging Markets
February 2008 - By Dr. Nagendra V Chowdary

Guillermo D'andrea
Professor of Business Administration at IAE Business School, Austral University in Buenes Aires, Argentina. He is the Research Director of the Coca-Cola Retailing Research Center, Latin America.

This lack of a stable and to a certain extent large income makes them buy on a daily basis. Women at this side of society mostly stay at home, caring for the family and cooking their meals. As they do their cooking everyday, they are expert buyers of fresh. To them the offer of produce at the modern trade outlets looks artificial. They value brands, but for the guarantee of quality rather than a sense of achievement. And they need this guarantee more than others, for their scarce funds don't allow for shopping mistakes. Daily shopping fills the day, and is done in small amounts and at specialists, so distant large stores don't make sense either. In many places they belong to the informal sector, may not even be paying taxes other than the services they consume and sometimes not even that. But they devote a high share of their income to consumer products, and when considered aggregate, they represent a portion of the market bigger than the better-off segments. They are now better informed and willing to improve their lifestyle, but they keep their ways rather than try to mirror and adopt those of the upper classes. As pointed out before, these new emerging middle classes are proud of their progress and, rather than looking up to the higher levels in search of new ways of living, they try to improve theirs, while retaining many of their customs.



• What have been the retail innovations in emerging markets? In which of the emerging markets, have you noticed sizeable retail innovations?
  A common thread in the retail innovations researched is that they aim at providing access whether it be to products, services or a better lifestyle. We found that the better offs only want the same products and stores that cater to their equals in developed markets. It's a horizontal segment nomatter what country they live in. But for the lower income segments access is the key. Providing access by means of giving credit to those that are neglected by financial institutions, making products available at distant places at big city prices and a full assortment managing a freshmarketwithmodern shoppingmall techniques and adding apparel stores, a food court, D-I-Y and appliance chain stores under one roof with public transportation and security brings access to better shopping occasions as in Lima's Minka market. And this provides the companies with access to these vast masses of consumers. Examples like these may be found in most emerging countries, where local entrepreneurs have understood how to satisfy the needs of their people better.

• How can retail innovation drive leadership with consumers?
  As it provides access to better products, services, guaranteed quality and shopping experience, it's a magnet that attracts customers. These retailers provide access with respect, and as customers feel understood and respected, their loyalty is conquered better thanmany loyalty programs designed by smart marketers.

• What are the retail formats that are more often seen in emergingmarkets? Are they different from the developed countries' retail formats? If yes, what are the differences?
  Due to the daily shopping habits, emerging markets are filled with small, independent convenience stores and specialists grocers, butchers, bakeries and the like that know their customers by their names, realize how to cater to their needs, what to sell and give personal service and small credit to them. For all these reasons their inventory turns are higher than that of chains, they enjoy a loyal customer base and as their costs are low, they survive in spite of their small size and lack of sophisticated management techniques.

• Are there any ideal retail formats for the emerging markets, given their growth phase, customer profile, etc?
  Small stores with personal service, competitive prices and low operating costs may have good chances not too far away from the soft discount formula. But this also requires an owner's mindset. Once organized chains have solved this problem they'll be able to compete in this huge market.

• What are the pillars from which retail concepts are developed and what are the drivers of innovation success in emerging markets?
  There are eight pillars: five that attract customers to the store and three that secure profitability. The first five are the store's location, size and design; a carefully selected product assortment; the price and quality value formula; the people service offering and the communications. The three efficiency factors are IT systems to track operations and product replenishment; efficient logistics and relations with suppliers.

  The main driver of innovation is to give access, and therefore gain access to this segment. For this, retailers work with combinations of the above mentioned factors by combining formats and assortments, providing service with low-cost formulas, using IT to expand its operations, and always keeping inmind a clear idea of their clients' needs and actual possibilities.

1. ICMR Emerging Market Case Studies
2. ICMR Case Collection
3. Case Study Volumes