Published on November 25th, 2021 📆 | 6369 Views ⚑0
Here are four building blocks for a future-ready retail with technology
Technology is changing the world in ways that would be considered unimaginable a decade ago. At the turn of the century, if someone had told you about dictating your shopping list to a phone to get it delivered within half an hour, or booking a cab at a click of a button, you would have dismissed it as futuristic! But all of this has become a way of life now – our ‘new normal’.
In the last decade or so, the retail industry has seen several transformations and evolved exponentially due to the assimilation of online and offline channels, growing consumer awareness and rising disposable income. In recent years, the digitalization and formalization of the economy as well as the easy availability of venture and risk capital has catapulted the sector’s growth in India.
According to a Bain & Company 2021 report, India’s retail sector is one of the fastest-growing in the world, projected to touch $1.3 trillion by FY26. The share of e-commerce is expected to grow from 6% of the overall market in FY21 to almost 11% by FY26. However, traditional trade, which has been extremely resilient during the pandemic, will remain relevant for a long time. Despite stiff economic headwinds, traditional trade’s market share rose marginally from 87.1% to 88.8%.
When the pandemic hit, many small retailers and mom-and-pop stores adapted to digital platforms to keep supply chains and operations running. Having tasted success with technology, they are keen to adopt an omni-channel approach for their end customers. Traditional retailers and kiranas are the backbone of Indian retail, contributing approximately 80% to the total retail trade and 11% to the GDP. A Deloitte-FICCI report echoes this fact, highlighting how digitalization is empowering them and opening new growth opportunities for the FMCG sector.
A black swan event, COVID-19 has triggered a fundamental disruption across all industries, especially retail, leading to a change in the way consumers shop. Customers are increasingly becoming more demanding; hence, retailers have to constantly innovate and reinvent themselves to stay relevant. With the pandemic accelerating India’s digital commerce transition, the digital evolution that would have probably taken half-a-dozen years happened within weeks of the pandemic-induced lockdown. Having an online or omni-channel presence isn’t a choice anymore. Now, players need to invest in technology to enhance the customer experience. The digital acceleration has opened up newer opportunities for the sector.
Yet, the million-dollar question remains: with the changing customer consumption and buying behaviour, where is retail in India heading? Some of levers are:
Hybrid behaviour: Customers are now deciding ‘when to shop’, ‘where to shop’ and ‘how to shop’– be it online, offline or a mix of both. They are looking at a seamless omni-channel experience. Therefore, ‘Phygital’ has emerged as an intrinsic part of customers’ shopping experience, and this integration between offline and online retail is likely to grow further. Retailers will have to imbibe an integration strategy to enhance the customer value proposition and experience.
Instant gratification: Customers want to order everything at a click of a button, and get deliveries within 15 to 30 minutes. Besides, they want a one-stop solution for all product and service needs. The era of instant gratification means people are unwilling to wait for hours or days to have their products delivered. Hence, the need of the hour is to build efficient supply chains and delivery solutions. Capabilities for faster deliveries with more than 99% OTIF (on time in full) delivery, AI/ML-based demand forecast, IoT for real-time monitoring and the likes are the future of retail.
‘Retail-tainment’: Today, customers seek and appreciate superior and unique experiences through elements such as gamification. Simply ordering or buying a product is no longer exciting and retailers must effectively engage and involve customers across all touchpoints in their shopping journey. Virtual fitting rooms and experiential retailing; 3D modelling and augmented reality to help customers try/visualise their products online; chatbots and voice assistants for a personalized brand experience; big data analytics for ultra-personalized and hyper-localized target marketing and customer engagement are key for making retail future-ready.
One-stop shop: Customers seek a complete spectrum of services under one roof such as payment options, credit/finance, insurance, logistics and delivery choices and more. As a result, it has given rise to ecosystem players who facilitate or complete the entire value chain of services. For instance, financing options may include purchasing goods via EMIs and BNPL (buy now, pay later) schemes. Thereby, this is a winning proposition for all stakeholders – the buyer, the seller and the financing partner. Retailers need to invest in partnership to become a complete ecosystem player.
Value consciousness: In India, price-sensitive customers constantly seek exciting offers and discounts, making smart pricing and targeted promotions critical to engage and connect with customers. Since retail-margin pressures are mounting, driven by intense competition, it is imperative to reduce the cost to serve and ensure profitability while delivering as per evolving customer needs. Retailers must leverage automation technologies to lower the cost of operations.
The technologies that initially defined digital transformation – artificial intelligence, process automation and deep analytics powered by machine learning – are still evolving, even as new technologies emerge to augment and complement their capabilities. Supply chain and delivery management have transformed drastically in the past 20 months, thereby leveraging gig workers and technology, all of which are growing rapidly.
Technology will undoubtedly remain a critical enabler to provide a superior customer experience. Meanwhile, the levers for building future-ready retail would be to focus on creating an agile and sustainable supply chain, providing an immersive customer experience along with the convenience of phygital shopping while being a one-stop destination for all customer needs.
The writer is the MD and CEO – METRO Cash & Carry India and Chairman – Retail & Internal Trade Committee, FICCI