Forcing a Retail Upsell: Are you getting tricked into buying more?

I have been noticing more and more supermarkets and other retailers converging on these customer-unfriendly methods to grow profits.

Avoid them or use them, it's up to you, so here you go.

NonStandard Weighing units:

Ever noticed how more and more instances of non-standard weighing units are percolating everywhere. For instance, a Cadbury's dairy milk, BourneVille, Crackle and Fruit & Nut, all of them are 45 rupees. The packaging and sizes look similar, except that : Bourneville is 32-gram bar while crackle and fruit & Nuts are 45-gram bars.

Similarly, it's easy for you to find pre-packed fresh vegetables with pricing like 42 gms for 16 rupees and no per kilo price mentioned.

For example: would you buy unpacked spinach at 335 rupees kg or a prepacked and labeled pack at 16 rupees for 42 grams?

The idea is simple, this pricing makes it difficult for us to compare 2 products by the virtue that it takes mental maths, which most people are not comfortable with. Even if you are a math nerd, the mere act of shopping means doing more than 50 comparative mental math problems. 90% of people would give up at some point and just pick whatever is in front of them.

Hi-Lo bundling:

What: Simply bundle a low-quality product with a high-quality product and price it mid-way.

Example: A Simple example would be if I combine 3 Washington apples (cheaper) with one leftover/near expiry/part damaged Fuji apple (expensive) to create a bundled pack of 4 apples and sell it at the price of Washington apples.

Useful for: Perishables; slow moving products.

Trick:Pricing is the key, incorrect price, and your good product will also get stuck

Business' benefit: The expensive bundled product is either useless or of very poor quality which the customer would not have picked if left on its own.

Switches or Stockouts

Ever looked for your brand/variety of biscuit, frozen food, soap but had to settle for a variant? No, it's not always that your product was fast moving and therefore disappeared.

Consider the following fictional scenario as an illustration-

• A fictional retailer BabSoap buys 1000 bars of Jon Dunn's baby soap at 10% discount and is able to sell them every week. The next brand is Chi Lo's soap with weekly sales of 200 bars. Where Jon Dunn sells for 100 rupees, Chi Lo's sells for 120 Rupees.
• Chi Lo wants customers to try their soap at least once, and their marketing budget for each such trial is equal to 50% of the soap's MRP(60 rupees). They come to BabSoap with a proposal. Chi Lo will give BabSoap 1000 bars of soap for free on an order of 1000 bars.
• BabSoap being a Profit Focused retailer, says yes. They get delivery of 2000 bars of Chi Lo's soap. They delay four week's payment to Jon Dunn's and as a result, don't get the stocks from Jon Dunn's.
• BabSoap floods their shelf with 2000 bars of Chi Lo's at 10% discount (now 108 rupees)creating an attractive display. Customers coming in to buy Jon Dunn for 100 realize that they may have to buy Chi Lo's for 8% more.
• Customers don't like it, but then they agree to buy, as they don't want to go out to another store just for a soap bar. Even though they are to pay more, they feel they are getting a deal as the switched product is at a discount.
• BabSoap manages to sell 800 Bars per week.After 2 weeks, they clear the dues, apologize profusely and bring back Jon Dunn's soap back on the shelf.
• Jon Dunn realizes a lot of people came looking for their soap but now have bought Chilo's soap. Similar incidents have happened at other stores and the market share for the week for Jon Dun has slipped from 80% to 55%.
• Jon Dunn realizes to give in and buys BabSoap's Vendor Marketing and store promotions program to get premium shelf space and keep a promotor in store to gain back the lost sales.
• BabSoap profits again.

What a retailer wants

A retailer wants to serve you and grow sales. But more than that the retailer wants to grow margins.

Margins are directly dependent on retailer's clout, or the ability to push the distributor or manufacturer for margins (remember 5 forces model). This push in offline retailing happens in following ways, and most of them are win-lose strategies.

• Payment terms : Demanding higher credit period from the intermediary; Delay payments anyways.
• Selling shelf space : Forcing manufacturer to pay for premium shelf space, or in-store promoters to achieve a certain sales target. Push arbitrary sales qualifying targets to keep the product in store etc.
• Lower order sizes : Buying smaller orders more frequently, increasing logistics and stock holding cost for intermediary, but reducing the burden from the retailer
• Ask higher Margins: Asking for premium discount slabs
• Exclusivity: Charge manufacturer for exclusivity;Making the competing product go out of stock. If the competitor is entrenched, or contractual obligations prohibit stock-outs or the sales force is aggressive, then move the product to a dead corner, and reduce product discovery.

Notice how Patanjali Dantkanti has been nicely tucked away in a corner (hypercity) with ayurvedic shampoos, away from the toothpaste section . For all contractual purposes the SKU is in stock and selling, but gives some time for competitors to cover the distance from relevant section

• Add-ons: Special schemes, extra product, cash proxies as add-ons to the placed order. Can be 10 extra products for free, or a movie ticket for the store manager depending on the ethical environment.

The customer is mostly at the receiving end of these underhand methods.

In short, whenever a retailer tries to shape customer buying behavior by push, and not pull, it spells bad news for customer experience.

Has something similar happened to you? Were you forced to buy something which you didn't want to?

Last Word; A SITH or A JEDI?

In a supply chain solution, it's difficult to build a customer facing brand, online or offline. You will face intense competition and huge costs.

But once you have managed to control the last touch point on the customer decision-making-journey, you have a choice to either be a SITH or a JEDI.

Like the SITH, you can use this power of influencing customer buy decision for to make money by selling the customer out and sucking the supply chain dry.

Or you can be the JEDI, creating a win-win solution, where your profits might be a little lower, but will grow over time by building trust and sales volumes. You will have customers from all walks of life, who will be loyal. You will have suppliers, who will help you with business intelligence and be a partner in your business.

SITHs profit in the short run and sometimes drive the JEDI's out of business by driving the investor expectation through the roof. But if a JEDI survives, it survives forever.

A JEDI's survival means that the business model works by creating intrinsic value and not just arbitrage. There are online parallels as well, which i am sure you can already see.

Thanks for reading.

Please do share your views below!!

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The views expressed here are my own and don't reflect upon any of my present or previous employers.